Figure 16-11
-Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?
A)More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left.
B)More firms will enter this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.
C)Firms will exit this market and each firm will have a smaller share of the total market demand, shifting this firm's demand to the left.
D)Firms will exit this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.

Question

Figure 16-11 
-Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?
A)More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left. 
B)More firms will enter this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right. 
C)Firms will exit this market and each firm will have a smaller share of the total market demand, shifting this firm's demand to the left. 
D)Firms will exit this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.

Quizplus · Accepted Answer

In the long run, new firms enter a monopolistically competitive market if existing firms are making profits, leading to a decrease in demand for each individual firm as the market becomes more competitive.

Figure 16-11 -Refer to Figure 16-11. the Graph Depicts a Monopolistically Competitive