Question

In the model of monopolistic competition, if an industry has large ________ relative to another industry, then we should expect _________ firms to operate in a long-run equilibrium of that industry. A. marginal costs; less B. fixed costs; less C. marginal costs; more D. fixed costs; more

Answer 1

Answer:

Option A:

Large Marginal costs; less firms in the industry

Explanation:

Monopolistic competitions are market models which are charaterized by low barriers to entry.  High marginal costs will discourage firms from entering the industry, thereby leading to a reduced number of firms operating there in the long run.

Since the marginal costs reduce profit, if this continues to rise, most firms will discover that it is difficult to make profit in such an industry. They  will definitely leave industry for a different one.

This makes Option C  the answer.