Exhibit 10-1 A monopolistic competitive firm
-In the long run, which of the following is true for the firm shown in Exhibit 10-1?
A) The firm's demand curve shifts leftward.
B) The firm's average total cost curve shifts upward.
C) Neither a nor b are possible.
D) Both a and b are possible.

Question

Exhibit 10-1 A monopolistic competitive firm 
-In the long run, which of the following is true for the firm shown in Exhibit 10-1?
A) The firm's demand curve shifts leftward. 
B) The firm's average total cost curve shifts upward. 
C) Neither a nor b are possible. 
D) Both a and b are possible.

Quizplus · Accepted Answer

In the long run, the monopolistic competitive firm shown in Exhibit 10-1 can experience both a leftward shift in its demand curve (due to increased competition from other firms) and an upward shift in its average total cost curve (due to diminishing returns and increased costs of production). Therefore, option D is the correct choice.

Exhibit 10-1 a Monopolistic Competitive Firm