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Question
If monopolistically competitive firms earn short-run economic profits, we expect to see
A) new firms enter the industry, which shifts the demand curves of the existing firms to the left until firms earn zero economic profits.
B) new firms trying to enter the industry, but unable to do so because of barriers to entry.
C) existing firms altering their scale of plant to try to capture larger profits. The combined effect is to cause all firms to earn zero economic profits.
D) existing firms increasing prices to try to capture larger economic profits.
Answer
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