Question

Suppose that there are 50 firms in a monopolistically competitive industry in country A and 50 firms in the same monopolistically competitive industry in country B. If country A and country B engage in international trade, we expect that the total number of firms in this industry:

Answer 1

The total number of firms in this industry will decrease in the long run because increased competition will mean lower profit margins which will lead to some firms earning sub normal profits which will force them to leave the industry.

Step-by-step explanation: