Question

The accompanying graphs are for a purely competitive market in the short run. What do the graphs suggest about the market in the long run?

1) The market will continue to be purely competitive
2) The market will become monopolistic
3) The market will become oligopolistic
4) The market will become a monopoly

Answer 1

In the long run, the market will become monopolistically competitive.

Step-by-step explanation:

In the long run, the graphs suggest that the market will become monopolistically competitive.

A purely competitive market is characterized by many firms producing identical products and there is no product differentiation. However, in the long run, new firms may enter the market attracted by the positive economic profits earned by firms in the short run. This entry of new firms will lead to product differentiation and the market will become monopolistically competitive.