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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