Suppose a firm operating in a market characterized as monopolistic competition is making positive economic profit in the short run attracting new firms to the market do we expect to happen to the demand for the this firm as new competi Demand decreases and becomes more elastic. Demand increases and becomes more inelastic. Demand increases and becomes more elastic. Demand decreases and becomes more inelastic.

Q: In monopolistic competition advertising is important for product differentiation. True False

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A: Given  conditions: P > MC P < ATC

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A: In monopolistic competitive market, there is free entry and exit of firms in the long run.

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A: Answer to the question is as follows:

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A: Monopolistically competitive industry has firms which have freedom to entry and exit.

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A: Given information Own price elasticity=-2.5 Advertisement elasticity=0.7 Marginal cost =$30 Annual…