The figure below shows the demand, marginal revenue and marginal cost curves for

Question

The figure below shows the demand, marginal revenue and marginal cost curves for a firnm operating in a monopolistically competitive market. Use the information in the figure to answer the following 3 questions ATC MC 100 80… Df 30 MR 2000 4000 15. Which of the following is NOT true about long-run adjustment? a. Existing firms exit the market until the profit is O b. The surviving firms in the market face increased demand. c. The number of differentiated products in the market decreases. d. Consumers are better off.

Explanation / Answer

Answer

Option d

the consumers are worse off

because the market is incurring losses some of the firms leave the market which will shifts the supply curve to left and price will increase which will decrease consumer surplus.

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