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Assume That Economic Profits Are Earned by Monopolistically Competitive Firms

Question 229

Multiple Choice

Assume that economic profits are earned by monopolistically competitive firms. What will happen in the long run?


A) New firms enter, the market demand rises, and the price for each firm falls until normal profits occur.
B) New firms enter, the market supply rises, and the price for each firm falls until P = MC for each firm.
C) New firms enter and demand for each firm's product rises until economic profits are eliminated.
D) New firms enter and demand for each firm's product falls until economic profits are zero.

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