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Suppose the firms in a monopolistically competitive market are incurring economic losses. What will happen to move the market to its long-run equilibrium?
More close substitutes will appear in the market until economic profits are zero.
The firms that dropped out of the market will reenter once the level of economic losses is zero.
Firms will continue to exit the market until economic losses are equal to zero.
The demand functions of all the firms remaining in the market will become relatively more elastic.
What happens in a perfectly competitive industry when economic profit is greater than zero?
Illustrate what is the present macroeconomic situation (e.g. worrying about inflation also/or recession) in the U.S.
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