Q1: In the model of monopolistic competition, if the price is ______ than average costs, then firms are earning __________ economic profit and we should expect firms to _________ the industry.

• A.equal to; zero; exit
• B.less; positive; enter
• C.less; negative; exit
• D.more; negative; exit

Q2:In the model of monopolistic competition, if an industry has large ________ relative to another industry, then we should expect _________ firms to operate in a long-run equilibrium of that industry.

• A.fixed costs; less
• B.marginal costs; more
• C.fixed costs; more
• D.marginal costs; less