Figure 1013 Figure 10

Multiple Choice

Figure 10.13 Figure 10.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 10.13.If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

A) Some firms will exit the market causing the demand to increase for firms remaining in the market.
B) The firms that are incurring losses will be purchased by their more successful rivals.
C) Inefficient firms will exit the market, and new cost efficient firms will enter the market.
D) Firms will have to raise their prices to cover costs of production.