When monopolistically competitive firms realize losses in the short run, some firms will exit the industry, increasing market shares and prices and eliminating losses for the remaining firms.
Monopolistically competitive is a form of imperfect competition in which a large number of producers or organisations market distinctive goods that are not exact replacements. Restaurants, shoe stores, clothing brands, and other businesses or organisations are examples of those participating in monopolistic competition.
Generally speaking, a monopolistic competitive market is one that has a relatively low entry barrier and a high number of firms (producers).
Therefore, in a monopolistic competition, firms have some influence over pricing, make their own choices, and ultimately have the freedom to enter or depart the market. As a result, these businesses incorporate aspects of both monopoly and competition.
The marginal revenue of a monopolistically competitive firm equals the marginal cost when it reaches long-term equilibrium.
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