The graph to the right shows a typical firm in a monopolistically competitive industry in long run equilibrium. Profits are zero owner(s) is (are) earning a return equal to their next best opportunity.
Suppose the industry is the single shop local coffee house
industry, (to distinguish it from national chains which have stores
in many cities). And as a result of the popularity of the TV sitcoms
"Friends" and "Frasier" there is an increase in patronage of local
coffee houses. How does the industry adjust to a new long run
equilibrium?
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