(Answered) Draw a graph that shows a monopolistically competitive firm with a short-run profit. Explain what…

➤ Why does entry make the demand curve more elastic?
When new firms enter, they create more close substitutes and increase consumer choice. Buyers react more strongly to price changes, so the percentage change in quantity demanded rises for a given price change. The firm loses some pricing power, faces a flatter demand curve, and must lower its markup to retain customers.