Suppose that a firm in monopolistically competitive market is producing 30 units of output.At this level of production, the firm charges $50 per unit.Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit.Given this information, in the long run you would expect
A)firms to exit the market.
B)price to increase.
C)firms to enter the market.
D)firms to maintain their current output and price.

Question

Quizplus · Accepted Answer

Since the firm is making a profit (price > average cost), new firms will be attracted to the market, leading to entry in the long run.

Suppose That a Firm in Monopolistically Competitive Market Is Producing