When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality, then market efficiency could be improved if some companies left the market because there are too many of them.
The long-run equilibrium state is quite significant for the monopolistically competitive organization. The supply of differentiated items rises as a result of new firms entering the market, shifting the firm's market demand curve to the left.
When businesses enter a market that is monopolistically competitive and the business-stealing externality is greater than the product-variety externality, market efficiency may be increased if some businesses leave the market because there are already too many of them.
Individual businesses won't be able to maintain a premium price point for their goods. Long-term economic profit for businesses engaged in monopolistic competition is zero. There is little incentive for new industry entrants at this time.
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