As New Firms Enter A Monopolistically Competitive Market, Profits Of Existing Firms. In the long run, however, economic profits tend to be eroded as new firms. Monopolistic competition involves many firms competing against each other, but selling products that are distinctive in some way.

Monopolistic competition involves many firms competing against each other, but selling products that are distinctive in some way. In the long run, however, economic profits tend to be eroded as new firms. In the short run, firms may earn economic profits or incur losses.