Question

In the following figure, a monopolistically competitive firm is in the short run. In this scenario, P < ATC, which means that this firm is making a loss. This short-run loss means that other firms will exit the market because they are making a loss as well. Shift a curve, or curves, to depict the effect of firms exiting this market in the long run. When shifting the curve, or curves, make sure not to change the slope of the curve(s) 

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Answer 1

Answer
In the long run, firms will exit the market which increases the individual firms demand curve and the demand curve shifts to the right and MR curve also.

The firm will exit up to the demand curve touches the ATC curve.

Price or costs MC ATC D1 D2 quantity

Answer 2

Demamd curve and MR curve will shift parallelly up and this will continue until demand is tangent to average total cost curves which will lead to normal profit for monopolistic firms leading to no new entry and exit from the market.

MC nan M尺 2. 34