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Suppose the market for fast-food value meals is monopolistically competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive firm's value meals. How will this figure change as the market moves toward long-run equilibrium? In the long run, O A. the average cost curve and the marginal cost curve will shift up because the firms are currently making profit. O B. the demand curve will shift to the left and become more elastic because the firms are currently making profit. OC. D. the demand curve will shift to the right and become more elastic because the firms are currently experiencing losses. O E. nothing will change because the firms in this market are breaking even. nothing will change because monopolistically competitive markets have barriers to new firms entering. Price and cost (per value meal) 8.00 7.60 7.20- 6.80 6.40- 6.00- 5.60 5.20- 4.80 4.40 4.00- 3.60 3.20- 2.80- 2.40- 2.00 1.60 1.20 0.80- 0.40 0.004 For N- 0 2 4 MR 6 8 10 12 14 Quantity (value meals) MC 16 ATC D 18 20

Suppose the market for fast-food value meals is monopolistically competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive firm's value meals. How will this figure change as the market moves toward long-run equilibrium? In the long run, O A. the average cost curve and the marginal cost curve will shift up because the firms are currently making profit. O B. the demand curve will shift to the left and become more elastic because the firms are currently making profit. OC. D. the demand curve will shift to the right and become more elastic because the firms are currently experiencing losses. O E. nothing will change because the firms in this market are breaking even. nothing will change because monopolistically competitive markets have barriers to new firms entering. Price and cost (per value meal) 8.00 7.60 7.20- 6.80 6.40- 6.00- 5.60 5.20- 4.80 4.40 4.00- 3.60 3.20- 2.80- 2.40- 2.00 1.60 1.20 0.80- 0.40 0.004 For N- 0 2 4 MR 6 8 10 12 14 Quantity (value meals) MC 16 ATC D 18 20

Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 4QFR
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Suppose the market for fast-food value meals is monopolistically competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive firm's value meals. How will this figure change as the market moves toward long-run equilibrium? In the long run, O A. the average cost curve and the marginal cost curve will shift up because the firms are currently making profit. O B. the demand curve will shift to the left and become more elastic because the firms are currently making profit. nothing will change because monopolistically competitive markets have barriers to new firms entering. OC. O D. the demand curve will shift to the right and become more elastic because the firms are currently experiencing losses. O E. nothing will change because the firms in this market are breaking even. Price and cost (per value meal) 8.00- 7.60- 7.20 6.80 6.404 6.00 5.60- 5.20- 4.80 4.40 4.00 3.60 3.20 2.80 2.40 82.00- 1.60 1.20- 0.80- 0.40- 0.001 0 2 4 MC ATC MR D 6 8 10 12 14 16 18 20 Quantity (value meals)
Transcribed Image Text:Suppose the market for fast-food value meals is monopolistically competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive firm's value meals. How will this figure change as the market moves toward long-run equilibrium? In the long run, O A. the average cost curve and the marginal cost curve will shift up because the firms are currently making profit. O B. the demand curve will shift to the left and become more elastic because the firms are currently making profit. nothing will change because monopolistically competitive markets have barriers to new firms entering. OC. O D. the demand curve will shift to the right and become more elastic because the firms are currently experiencing losses. O E. nothing will change because the firms in this market are breaking even. Price and cost (per value meal) 8.00- 7.60- 7.20 6.80 6.404 6.00 5.60- 5.20- 4.80 4.40 4.00 3.60 3.20 2.80 2.40 82.00- 1.60 1.20- 0.80- 0.40- 0.001 0 2 4 MC ATC MR D 6 8 10 12 14 16 18 20 Quantity (value meals)
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