Thirdly, restrictions on entry into branch of new firms are absent therefore it is simple to new firms to enter on the market with the trade marks, and to the existing firms – to leave if their goods ceased to be in demand.
Penetration of new firms reduces profits to zero both in absolutely competitive market, and in monopolistically competitive market. In absolutely competitive market the firm faces the horizontal line of demand, and therefore, the zero profit is the share of a point of a minimum of a curve of average costs (In the market of the monopolistic competition the curve of demand has an inclination down and therefore, the point of zero profit is more left than a point of the minimum average costs. These reserve capacities are inefficient as average costs can be reduced if the smaller number of firms works.
That producers in the conditions of the monopolistic competition are firms, typically small by the size, as in absolute, and relative expression, assumes that the scale effect and the required capital are small.
Secondly, rather large number of producers acts on the market. Rather large number is meant as presence of 25, 35, 60 or 70 producers. In this regard firms possess rather small shares of the market and therefore have very limited control over market price. Also such situation guarantees that firms will not be able to coordinate the actions for the purpose of change of outputs or artificial price increase.