Asked by Jordan Jeyachandran on Jun 05, 2024
Verified
In the long run if some firms are losing money in monopolistic competition
A) the industry supply curve will increase and market price will fall.
B) the industry supply curve will increase and market price will rise.
C) the industry supply curve will decrease and market price will fall.
D) the industry supply curve will decrease and market price will rise.
Industry Supply Curve
A graphical representation showing how much product a market can offer at various prices, for a specific industry.
Market Price
Market Price is the current value at which an asset or service can be bought or sold in an open market.
Monopolistic Competition
A market structure in which many companies sell products that are similar but not identical, allowing for product differentiation.
- Recognize the impact of entry and exit of firms in monopolistic competition on profits and market dynamics.
Verified Answer
MM
Mohammad Mahdi MalekiJun 09, 2024
Final Answer :
D
Explanation :
In monopolistic competition, if firms are losing money, some will exit the market. This reduces the overall supply (industry supply curve decreases), leading to an increase in market price as the remaining firms face less competition.
Learning Objectives
- Recognize the impact of entry and exit of firms in monopolistic competition on profits and market dynamics.