Price and cost (dollars per unit) 120 MC 100 ATC 80 60 D MR 60 80 100 120 140 Quantity (units) The figure above shows a firm operating in a monopolistically competitive market. If nothing else changes, this firm O should increase production to 120 units in order to reduce its cost. O should stay open but decrease production below 80 units in order to reduce its cost. O will exit the market because it is currently incurring an economic loss in the short run. O will produce 100 units to eliminate the deadweight loss. 40 20

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Price and cost (dollars per unit)
120
MC
100
ATC
80
60
D
MR
60
80
100
120
140
Quantity (units)
The figure above shows a firm operating in a monopolistically competitive market. If nothing else
changes, this firm
O should increase production to 120 units in order to reduce its cost.
O should stay open but decrease production below 80 units in order to reduce its cost.
O will exit the market because it is currently incurring an economic loss in the short run.
O will produce 100 units to eliminate the deadweight loss.
40
20
Transcribed Image Text:Price and cost (dollars per unit) 120 MC 100 ATC 80 60 D MR 60 80 100 120 140 Quantity (units) The figure above shows a firm operating in a monopolistically competitive market. If nothing else changes, this firm O should increase production to 120 units in order to reduce its cost. O should stay open but decrease production below 80 units in order to reduce its cost. O will exit the market because it is currently incurring an economic loss in the short run. O will produce 100 units to eliminate the deadweight loss. 40 20
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