When firms exit a monopolistically competitive industry:
A) the average total cost curves of remaining firms will shift upward.
B) the demand curves of remaining firms are decreased at each level of output.
C) the remaining firms will decrease production.
D) the average revenue received by remaining firms will increase at each level of output.

Question

Quizplus · Accepted Answer

When firms exit a monopolistically competitive industry, the demand for the remaining firms' products increases, as there are fewer substitutes available. This leads to an increase in the average revenue received by the remaining firms at each level of output.

When Firms Exit a Monopolistically Competitive Industry