Long-Run Equilibrium in Monopolistic Competition

More firms will enter the market and lure some customers away from the firm making an economic profit. The loss of customers to new entrant firms will drive down the demand for all firms producing similar products.

In the long run for the monopolistically competitive firm, economic profit will fall to zero.

Unlike long-run equilibrium in perfect competition, in the market of monopolistic competition, the equilibrium position is at a higher level of average cost than the level of output that minimizes average cost.

The economic cost in monopolistic competition includes some cost associated with product differentiation, such as advertising.