5 . How short-run prot or losses induce entry or exit Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's d curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the shortrun protmaximizing price and quantity for this monopolistically com; company. Then, use the green rectangle ( triangle symbols) to shade the area representing the company's prot or loss. 500 "I- 450 . 4m Monopolislioally Compelitive Outcome A a... H a: 9.' .o E 300 Prot or Loss 9. E g 250 E 9, Lu 200 9 i1 o. 150 100 54) -\\M Deman 0 -l l l . l l l l l N ( 050100150200250300350400450500 QUANTITY (Bikes) Given the prot-maximizing choice of output and price, the shop is making 7 prot, which means there are V shops in the industry relative to the longrun equilibrium. Now consider the long run in which bike manufacturers are free to enter and exit the market. Show the possible e'ect of this free entry and exit by shi'ing the demand curve for a typical individual producer of bikes on the following gr ('2) Demand PRICE (Dollars per bike) Demand QUANTITY (Bikes) Which of the following statements are true about both monopolistic competition and monopolies? Check all that apply. I: Price equals average total cost in the long run. Price is above marginal cost. I: I: Firms can earn positive prot in the long run. I: Firms earn zero prot in the long run