Refer to Figure 15.4. In the long run in this monopolistically competitive industry,

A) some firms will leave the industry until the remaining firms break even economically.
B) all firms will leave the industry.
C) some firms will enter the industry and industry profits will increase.
D) product supply will increase so prices will go up.

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Stephanie Holbrook · Accepted Answer

Final Answer : A, Explanation :  In the long run in a monopolistically competitive industry, firms will enter or exit the market until they are just breaking even, meaning they are making zero economic profit. This occurs because if firms are making profits, new firms will enter, increasing supply and reducing prices and profits until only break-even is possible. Conversely, if firms are making losses, some will exit, reducing supply and increasing prices until the remaining firms break even.

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