A monopolistically competitive industry adjusts to long run equilibrium through entry and exit.

   When new firms enter an industry existing firms will find that less is demanded for their product at all prices. If night clubs are profitable in some city and several new clubs open, existing clubs would most likely experience a reduction in the number of customers. We illustrate this as a shift back of demand and marginal revenue such as the shift to D2 and MR2 shown to the right.

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