Suppose the market for toothpaste is monopolistically competitive and in long-run equilibrium. The demand (and marginal revenue) for a firm in this industry is illustrated in the graph to the right, along with that firm's average total cost and marginal cost of producing its brand of toothpaste. Compared to perfectly competitive markets in the long-run, monopolistically competitive markets, such as that for toothpaste, are not allocatively efficient because they produce with excess capacity. For example, according to the graph, the monopolistically competitive firm has excess capacity of thousand tubes. (Enter a numeric response using an integer.) 200 180- 160- 140- 120- 100- 80- 60- 40- Price and cost (dollars per tube) MC ATC O
Suppose the market for toothpaste is monopolistically competitive and in long-run equilibrium. The demand (and marginal revenue) for a firm in this industry is illustrated in the graph to the right, along with that firm's average total cost and marginal cost of producing its brand of toothpaste. Compared to perfectly competitive markets in the long-run, monopolistically competitive markets, such as that for toothpaste, are not allocatively efficient because they produce with excess capacity. For example, according to the graph, the monopolistically competitive firm has excess capacity of thousand tubes. (Enter a numeric response using an integer.) 200 180- 160- 140- 120- 100- 80- 60- 40- Price and cost (dollars per tube) MC ATC O
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the market for toothpaste is
Transcribed Image Text:Suppose the market for toothpaste is monopolistically competitive and in long-run
equilibrium. The demand (and marginal revenue) for a firm in this industry is illustrated in the
graph to the right, along with that firm's average total cost and marginal cost of producing its
brand of toothpaste.
Compared to perfectly competitive markets in the long-run, monopolistically competitive
markets, such as that for toothpaste, are not allocatively efficient because they produce
with excess capacity.
For example, according to the graph, the monopolistically competitive firm has excess
capacity of thousand tubes. (Enter a numeric response using an integer.)
200
180-
160-
140-
120-
100-
80-
60-
40-
20-
Price and cost (dollars per tube)
MC
ATC
MR
D
100 200 300 400 500 600 700 800 900 1000
Quantity of toothpaste (per week in 1000s)
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