Figure 11-7 Figure 11-7 Shows Short-Run Cost and Demand

Multiple Choice

Figure 11-7 Figure 11-7 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-7.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 making 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.