In a monopolistically competitive market,
A)the entry of new firms creates externalities.
B)the absence of restrictions on entry by new firms ensures that there will be no deadweight loss.
C)there are always too many firms in the market relative to the socially-optimal number of firms.
D)firms cannot earn positive economic profits in the short run.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, the entry of new firms can create externalities, such as increased product variety for consumers and increased competition, which can affect existing firms' profits.

In a Monopolistically Competitive Market