In the presence of economic profits, firms enter a monopolistically competitive market until the market reaches the point at which the firms are generating a normal profit; then entry stops, and the market settles into its long-run equilibrium.
Monopolistic competition- Monopolistic competition is a sort of imperfect competition when numerous manufacturers compete with one another yet sell various items that are not exact substitutes for one another.
When a large number of businesses provide rival goods or services that are comparable but imperfect alternatives, monopolistic competition exists. A monopolistic competitive industry has minimal entry requirements, and decisions made by any one firm do not immediately affect those of its rivals.
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