Suppose firms in amonopolistically competitive industry currently charge a price lessthan their average total cost.

What will be theprofitability for firms in the short and long term?

1) In the short run,firms in this market will

A) make a loss.

B) break even.

C) make a profit.

2) In the long run, firms in the market will

A) break even or exit the market.

B) make a loss.

C) make a profit.

3) What will happen to the number of firms in the industry inthe long run?

A) More firms will enter the market.

B) The same number of firms will be in the market.

C) Some firms will exit the market.

# What would you expect to happen to the curves in the longrun?

4) The marginal revenue curve will likely

A) shift to the left.

B) remain unchanged.

C) shift to the right.

5) The perceived demand curve will likely

A) remain unchanged.

B) shift to the right.

C) shift to the left.