Suppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to unification the minimum average total cost the firm faces and the quantity associated with that cost. Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that ___ at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium ___ the efficient scale. True or False: This indicates that there is excess capacity in the market for shirts. Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the ___ externality implies that there is too much entry of new firms in the market.
Suppose that a firm produces polo shirts in a
Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive
Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that ___ at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium ___ the efficient scale.
True or False: This indicates that there is excess capacity in the market for shirts.
Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the ___ externality implies that there is too much entry of new firms in the market.
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