Tony's Italian Ice is a monopolistically competitive firm. If Tony's earns a profit in the short...
Tony's Italian Ice is a monopolistically competitive firm. If Tony's earns a profit in the short run, which of the following is most likely to occur?
a) New firms that sell Italian ice will enter the market, and Tony's cost curves will shift to the left.
b) New firms that sell Italian ice will enter the market, and Tony's demand curve will shift to the left.
c) New firms that sell Italian ice will enter the market, and Tony's demand curve will shift to the right.
d) New firms that sell Italian ice will enter the market, and Tony's demand curve will become more inelastic.
Homework Answers
"B"
As the new firms enter the market because tony is making a profit the demand curve of tony will shift to the left and he will be selling less.
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