The Figure Below Shows the Revenue and Cost Curves of a Monopolistically

question 19

Multiple Choice

The figure below shows the revenue and cost curves of a monopolistically competitive firm. Figure 25.2 In the figure,
D: Demand curve
MR: Marginal revenue curve
ATC₁ and ATC₂: Average total cost curves
MC: Marginal cost curve
In Figure 25.2, assume that the average total cost of the firm is represented by the curve ATC₂.In the long run, we would expect:

• A)entry of firms into the market because economic profits exist.
• B)exit of firms from the market because the existing firms suffer economic losses.
• C)that demand for each firm will increase.
• D)the market to become perfectly competitive.
• E)the market to become a monopoly.

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