Monopolistic competition is inefficient because:

a. firms earn positive economic profits.

b. the firms' marginal costs and marginal revenues are not equal.

c. firms have excess capacity in the long run.

d. entry is difficult.

According to the kinked demand theory, when one firm raises its price from $30/unit to $40/unit, other firms will:

a. also raise their prices.

b. refuse to follow.

c. increase their advertising expenditures.

d. exit the industry.