Monopolistic competition creates inefficiency because of the markups and excess capacity. The graph below depicts the situation for a hypothetical monopolistically competitive firm. The curves included in the graph are demand (D), marginal revenue (MR), average total cost (ATC), and marginal cost (MC). The graph is not graded, but you can move the point labeled P to help you find the numeric values to answer the questions. Price $ 80 MC MR P D ATC What is the size of the markup on the price? Number $ What is the size of the excess capacity? Number Units

Monopolistic competition creates inefficiency because of the markups and excess capacity. The graph below depicts the situation for a hypothetical monopolistically competitive firm. The curves included in the graph are demand (D), marginal revenue (MR), average total cost (ATC), and marginal cost (MC). The graph is not graded, but you can move the point labeled P to help you find the numeric values to answer the questions. Price $ 80 MC MR P D ATC What is the size of the markup on the price? Number $ What is the size of the excess capacity? Number Units

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

Monopolistic competition creates inefficiency because of the markups and excess capacity. The graph below
depicts the situation for a hypothetical monopolistically competitive firm. The curves included in the graph
are demand (D), marginal revenue (MR), average total cost (ATC), and marginal cost (MC). The graph is not
graded, but you can move the point labeled P to help you find the numeric values to answer the questions.
Price $
80
MC
M
45
P
D
ATC
Quantity
What is the size of the markup on the price?
Number
$0
What is the size of the excess capacity?
Number
Units

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