Figure 16-8
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms.
-Refer to Figure 16-8. Panel (d) illustrates the change that would occur if existing firms faced
A)long-run economic losses.
B)a decrease in the diversity of products offered in the market.
C)new entrants in the market.
D)firms exiting the market.

Question

Figure 16-8
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. 
-Refer to Figure 16-8. Panel (d) illustrates the change that would occur if existing firms faced
A)long-run economic losses. 
B)a decrease in the diversity of products offered in the market. 
C)new entrants in the market. 
D)firms exiting the market.

Quizplus · Accepted Answer

Panel (d) would illustrate the change due to new entrants in the market, which typically increases supply and can lead to a decrease in prices and profits for existing firms.

Figure 16-8 The Lines in the Figures Below Illustrate the Potential Effect