The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-As new firms enter a monopolistically competitive industry, the demand for a typical firm's product will most likely:
A)increase and become less elastic.
B)decrease and become more elastic.
C)increase and become more elastic.
D)decrease and become less elastic.
E)remain unaffected.

Question

The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
  D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-As new firms enter a monopolistically competitive industry, the demand for a typical firm's product will most likely:
A)increase and become less elastic. 
B)decrease and become more elastic. 
C)increase and become more elastic. 
D)decrease and become less elastic. 
E)remain unaffected.

Quizplus · Accepted Answer

When new firms enter a monopolistically competitive industry, they increase the number of products available, which decreases the demand for the products of existing firms and makes the demand for these products more elastic, as consumers have more substitutes to choose from.

The Figure Given Below Shows the Cost and Revenue Curves