True or False: This indicates that there is excess capacity in the market for engines.TrueFalseMonopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of theexternality implies that there is too much entry of new firms in the market. 3. Is monopolistic competition efficient?Suppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marginalrevenue (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 indicate the minimum average total cost the firm faces and the quantity associated with that cost.PRICE (Dollars per engine)10090807060504030201000MCATCMRDemand10 20 30 40 50 60 70 80 90 100QUANTITY (Thousands of engines)+Mon Comp OutcomeMin Unit CostBecause this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact thatoptimal quantity for each firm. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium isminimum average total cost.at thethe

A monopolistic competitive firm produce at the intersection of MR and MC. Minimum unit cost occurs…

Suppose that a firm produces wooden train engines 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.

Suppose that a firm produces wooden train engines 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.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

True or False: This indicates that there is excess capacity in the market for engines.
True
False
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.

3. Is monopolistic competition efficient?
Suppose that a firm produces wooden train engines 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 indicate the minimum average total cost the firm faces and the quantity associated with that cost.
PRICE (Dollars per engine)
100
90
80
70
60
50
40
30
20
10
0
0
MC
ATC
MR
Demand
10 20 30 40 50 60 70 80 90 100
QUANTITY (Thousands of engines)
+
Mon Comp Outcome
Min Unit Cost
Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that
optimal quantity for each firm. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is
minimum average total cost.
at the
the

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