3. Is monopollstic competition efficient? Suppose tha t a firm produces wooden t

Question

3. Is monopollstic competition efficient? Suppose tha t a firm produces wooden train engines in a monopolstically competitive market. The following graph shows its demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average cost curve (Ac). Place a tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equllibrlum price and quantity for this firm. Next, place a red point (cross symbol) to indicate the minimum unit cost the firm faces and the quantity associated with that cost. Dashed drop lines will automatically extend to both axes. PRICE (Dollars per engine Mc MonComp Outcome 18 16 Min Unit Cost AC 12 Demand MR 05 10 15 20 25 30 35 40 45 50 Because this market is a monopolistically competitive market, the firm's average cost in long-run equililbrium its

Explanation / Answer

Answer :- The average cost of firm (operating in a monopolistically competitive market scenario) in a long run equilibrium is dollar one per train engine greater than the minimum unit cost.

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