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The Figure Below Shows the Revenue and Cost Curves of a Monopolistically

Question 4

Multiple Choice

The figure below shows the revenue and cost curves of a monopolistically competitive firm. Figure 25.2 The figure below shows the revenue and cost curves of a monopolistically competitive firm. Figure 25.2   In the figure, D: Demand curve MR: Marginal revenue curve ATC<sub>1 </sub>and ATC<sub>2</sub>: Average total cost curves MC: Marginal cost curve In Figure 25.2, assume that the average total cost of the firm is represented by the curve ATC<sub>2</sub>.In the long run, we would expect: A) entry of firms into the market because economic profits exist. B) exit of firms from the market because the existing firms suffer economic losses. C) that demand for each firm will increase. D) the market to become perfectly competitive. E) the market to become a monopoly. In the figure,
D: Demand curve
MR: Marginal revenue curve
ATC1 and ATC2: Average total cost curves
MC: Marginal cost curve
In Figure 25.2, assume that the average total cost of the firm is represented by the curve ATC2.In the long run, we would expect:


A) entry of firms into the market because economic profits exist.
B) exit of firms from the market because the existing firms suffer economic losses.
C) that demand for each firm will increase.
D) the market to become perfectly competitive.
E) the market to become a monopoly.

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