As new firms enter a monopolistically competitive market, profits of existing fi

Question

As new firms enter a monopolistically competitive market, profits of existing firms ____ and product diversity in the market ____. a. decline; decreases b. rise; decreases
c. rise; increases d. decline; increases
As firms exit a monopolistically competitive market, profits of existing firms ____ and product diversity in the market ____. a. decline; decreases b. rise; decreases
c. rise; increases d. decline; increases
When a firm's demand curve is tangent to its average total cost curve: a. the firm must be operating in a monopolistically competitive market. b. economic profits are zero. c. the firm must be earning economic profits. d. the firm must be incurring economic losses.

Explanation / Answer

1. d. . decline; increases 2. b. rise; decreases 3. b. economic profits are zero.

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