a monopolistically competitive firm is producing at an output level in the short

Question

a monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.75, price is $4.50, marginal revenue is $2.25, and marginal cost is $2.25. The firm is a monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.75, price is $4.50, marginal revenue is $2.25, and marginal cost is $2.25. The firm is a monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.75, price is $4.50, marginal revenue is $2.25, and marginal cost is $2.25. The firm is

Explanation / Answer

Answer.) The firm is earning a short-run economic loss .

Let Q is the equilibrium quantity derived from the intersection of MR and MC curve. In this case,

Profit = Total Revenue - Total Cost = Quantity x Price - Quantity x ATC

Profit = Q x ( $4.5) - Q x ($4.75) = Q(-$0.25)

Therefore, firm is earning a short-run economic loss.

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