Figure 8.3
-Figure 8.3 shows demands and costs for a monopolistically competitive firm. When the firm's demand curve shifts from D₁ to D₂ and to D₃, in the long run we would expect

Question

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In the long run, the firm would face increased competition and so would have to lower its price to attract customers. As a result, the firm would earn only enough to cover its costs, resulting in zero economic profit. Therefore, the best choice is A. Choices B, C, and D are not true because the firm would not be able to charge a price equal to its marginal cost, increase its output level, or produce at the lowest average cost in the face of increased competition.

Figure 8.3 -Figure 8.3 Shows Demands and Costs for a Monopolistically Competitive