Choices for the first blank are: MR=MC, P>ATC, MR>MC, P=ATC second blank: equal

Question

Choices for the first blank are: MR=MC, P>ATC, MR>MC, P=ATC

second blank: equal to, greater than, less than.

3. Is monopolistic competition efficient? 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 indicate the minimum average total cost the firm faces and the quantity associated with that cost. 100 90 80 e 70 60 50 Min Unit Cost TC a 30 20 10 MR 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of shirts) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is ? at the ? the minimum

Explanation / Answer

One can tell that this monopolistically competitive firm is in long-run equilibrium by the fact that P = ATC at the optimal quantity. Furthermore, firm’s average total cost is greater than the minimum ATC. This indicates the presence of a markup on marginal cost. Therefore, the given statement is TRUE.

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