Even if the firms in a monopolistically competitive market collude successfully and fix price, economic profit will still be competed away if there is unrestricted entry. Do you agree with this statement? Support your answer. Will price be higher or lower under such an agreement in long-run equilibrium than would be the case if firms didn't collude? Explain fully.

This statement is true. If firms are trying to price fix, a new company could enter the market and undercut the fixed price. This is inevitable since it would be in the new company's best interest to do so since they will sell more products at the lower price.

The price, in the long run, would remain relatively unchanged since new entrants would push the price down to its natural equilibrium. However, it could be slightly higher depending on what percentage of the firms were colluding. If the percentage was extremely high the equilibrium price would likely be higher since the new entrants would just have to set their price slightly lower than the rest of the firms. If the percentage of colluding firms was lower than there would be more competition, and the equilibrium price would be close to its natural level.