perceived demand curve for each firm will shift to the left, because a smaller quantity will be demanded at any given

price. Another way of interpreting this shift in demand is to notice that, for each quantity sold, the firm will charge a

lower price. Consequently, the marginal revenue will be lower for each quantity sold—and the marginal revenue

curve will shift to the left as well. Conversely, exit causes the perceived demand curve for a monopolistically

competitive firm to shift to the right and the corresponding marginal revenue curve to shift right, too.

A monopolistically competitive industry does not display productive or allocative efficiency in either the short

run, when firms are making economic profits and losses, nor in the long run, when firms are earning zero

profits.

The Benefits of Variety and Product Differentiation

Even though monopolistic competition does not provide productive efficiency or allocative efficiency, it does
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