Refer to the diagram to the right which shows short run cost and demand curves for a monopolistically competitive rm in the market for designer watches. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run? A. B. Firms will have to raise their prices to cover costs of production. Some rms will exit the market causing the demand to increase for firms remaining in the market. The firms that are making losses will be purchased by their more successful rivals. Inefcient firms will exit the market and new costefficient rms will enter the market. Price and cost per unit ($) ATC AVC Q' a Quantity