Figure 13-8

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-8.Based on the diagram, one can conclude that
A)some existing firms will exit the market.
B)new firms will enter the market.
C)the industry is in long-run equilibrium.
D)firms achieve productive efficiency.

Question

Figure 13-8
  
Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-8.Based on the diagram, one can conclude that
A)some existing firms will exit the market. 
B)new firms will enter the market. 
C)the industry is in long-run equilibrium. 
D)firms achieve productive efficiency.

Quizplus · Accepted Answer

If new firms are entering the market, it suggests that existing firms are making economic profits, attracting new entrants.

Figure 13-8 Figure 13-8 Shows Cost and Demand Curves for a Monopolistically