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16 December, 08:54

If firms in a monopolistically competitive market are earning economic profits, which of thefollowing scenarios best reflects the change a representative firm experiences as the market adjuststo its long-run equilibrium?

A) Demand increases and becomes less elastic.

B) Demand decreases and becomes more elastic.

C) Demand increases and becomes more elastic.

D) Demand decreases and becomes less elastic.

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  1. 16 December, 09:23
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    B) Demand decreases and becomes more elastic.

    Explanation:

    In this example, we are talking about firms that compete in a monopolistically competitive market. A monopoly is a market structure that occurs when a company is the only supplier of a good. Under the situation described, the change a firm would experience is that demand decreases and becomes more elastic. The elasticity of demand refers to how responsive demand is to a change in another economic factor.
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