Suppose Toor's beer is sold in a monopolistically competitive market. If the price of Toor's is currently $2 and the average cost of producing Toor's is $1, in the long run we can expect

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In the long run, other firms will likely enter the market and produce similar beers, creating competition for Toor's beer. This increased competition will drive down the price of Toor's beer. However, as more firms enter the market, the average cost of production for each individual firm will increase due to diminishing returns to scale. Therefore, we can expect the price to decrease while the average cost of production increases.

Suppose Toor's Beer Is Sold in a Monopolistically Competitive Market