competitor who earns profits must expect the entry of firms with similar, but differentiated, products.

Monopolistic Competitors and Entry

If one monopolistic competitor earns positive economic profits, other firms will be tempted to enter the

market. A gas station with a great location must worry that other gas stations might open across the street or

down the road—and perhaps the new gas stations will sell coffee or have a carwash or some other attraction to

lure customers. A successful restaurant with a unique barbecue sauce must be concerned that other

restaurants will try to copy the sauce or offer their own unique recipes. A laundry detergent with a great

reputation for quality must take note that other competitors may seek to build their own reputations.

The entry of other firms into the same general market (like gas, restaurants, or detergent) shifts the demand

curve that a monopolistically competitive firm faces. As more firms enter the market, the quantity demanded
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