**Title: Short-Run Equilibrium for a Monopolistically Competitive Firm****Understanding the Graph:**The graph depicted outlines the price and quantity relationships for a monopolistically competitive firm in the short run. The key components of the graph include:1. **Axes:** - The horizontal axis represents quantity, labeled from 0 to 1000 units. - The vertical axis represents price, starting from $0.60 and going up to $1.40.2. **Curves:** - **Demand Curve (D):** Downward sloping, indicating a negative relationship between price and quantity demanded. - **Marginal Revenue Curve (MR):** Also downward sloping but steeper than the demand curve. - **Average Total Cost Curve (ATC):** U-shaped, reflecting the typical cost structure where costs initially decrease, reach a minimum point, and then start to increase. - **Marginal Cost Curve (MC):** Upward sloping, cutting through the ATC curve at its lowest point.**Equilibrium Analysis:**In the short-run equilibrium, the monopolistically competitive firm maximizes profit by producing the quantity where marginal revenue (MR) equals marginal cost (MC). Here’s the step-by-step process to find the equilibrium price:1. Identify the output level where the MR curve intersects the MC curve. This intersection occurs at a quantity of approximately 300 units.2. Follow this quantity up to the demand curve to find the price consumers are willing to pay for this quantity. This price is approximately $0.95.**Conclusion:**The short-run equilibrium price for the monopolistically competitive firm represented in the graph above is:- \$0.95Choose the correct answer:- $0.95. (Correct answer)- $1.00.- $0.60.- $0.85.

In the monopolistically competitive market, a firm act as a monopolist in the short-run as its…

1 price $1.40 $1.00 $0.95 $0.85 $0.60 MR MC ATC D 0 300 500 900 1000 Quantity The short-run equilibrium price for the monopolistically competitive firm represented in the graph above is: $0.95. $1.00. $0.60. $0.85.

1 price $1.40 $1.00 $0.95 $0.85 $0.60 MR MC ATC D 0 300 500 900 1000 Quantity The short-run equilibrium price for the monopolistically competitive firm represented in the graph above is: $0.95. $1.00. $0.60. $0.85.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

**Title: Short-Run Equilibrium for a Monopolistically Competitive Firm**

**Understanding the Graph:**

The graph depicted outlines the price and quantity relationships for a monopolistically competitive firm in the short run. The key components of the graph include:

1. **Axes:**
- The horizontal axis represents quantity, labeled from 0 to 1000 units.
- The vertical axis represents price, starting from $0.60 and going up to $1.40.

2. **Curves:**
- **Demand Curve (D):** Downward sloping, indicating a negative relationship between price and quantity demanded.
- **Marginal Revenue Curve (MR):** Also downward sloping but steeper than the demand curve.
- **Average Total Cost Curve (ATC):** U-shaped, reflecting the typical cost structure where costs initially decrease, reach a minimum point, and then start to increase.
- **Marginal Cost Curve (MC):** Upward sloping, cutting through the ATC curve at its lowest point.

**Equilibrium Analysis:**

In the short-run equilibrium, the monopolistically competitive firm maximizes profit by producing the quantity where marginal revenue (MR) equals marginal cost (MC). Here’s the step-by-step process to find the equilibrium price:

1. Identify the output level where the MR curve intersects the MC curve. This intersection occurs at a quantity of approximately 300 units.
2. Follow this quantity up to the demand curve to find the price consumers are willing to pay for this quantity. This price is approximately $0.95.

**Conclusion:**

The short-run equilibrium price for the monopolistically competitive firm represented in the graph above is:

- \$0.95

Choose the correct answer:
- $0.95. (Correct answer)
- $1.00.
- $0.60.
- $0.85.

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