Figure 16-2
This figure depicts a situation in a monopolistically competitive market.
-Refer to Figure 16-2. Which of the following will occur in the long run in this industry?

Question

Figure 16-2
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-2. Which of the following will occur in the long run in this industry?

Quizplus · Accepted Answer

In the long run, if a firm in a competitive market is earning positive economic profits, as indicated by the scenario (though the specific details of Figure 16-2 are not provided, this is a common interpretation for such questions), other firms will enter the industry. This entry will continue until economic profits are driven to zero, as the increased supply from new entrants lowers the market price.

Figure 16-2 This Figure Depicts a Situation in a Monopolistically Competitive Market