Question

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium, Group of answer choices the number of firms in the market decreases. each existing firm experiences a decrease in demand for its product. each existing firm experiences a rightward shift of its marginal revenue curve. each existing firm experiences an upward shift in its average total cost curve.

Answer 1

Answer:

The correct answer is the last option: Each existing firm experiences an upward shift in its average total cost curve.

Explanation:

To begin with, in the microeconomics theory the "monopolisticaly competitive" market refers to that one whose main characteristics are shared with the perfect competititve market but with the big difference of the differentiation of the product and for that reason every company in it fights for the publicity and inversions in that matter are a big deal. Therefore that at short run everybody wins, so new companies entry the market and when that happens the demand goes down for everybody due to the more supply now available and with that, the companies have to put more money into publicity in order to atract the consumers and that will affect that average total cost curve that will be represented with an upward shift in the graphic.