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The diagram below shows demand and cost curves for a monopolistically competitive firm.



FIGURE 11-4

Refer to Figure 11-4. If an increase in industry demand led to an outward shift in each firm's demand curve, and no change to the firm's costs, the typical firm would

▸ expand its output in the long run.

▸ be making profits and new firms would enter the industry in the long run.

▸ be making losses and some firms would exit the industry in the long run.

▸ decrease costs in order to break even at P1 and Q1 in the long run.

▸ increase costs in order to break even at P1 and Q1 in the long run.

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