Figure 12-3 Price and cost per unit MC ATC AVC $5 MR Quantity Figure 12-3 shows

Question

Figure 12-3 Price and cost per unit MC ATC AVC $5 MR Quantity Figure 12-3 shows short run cost and demand curves for a monopolistically competitive firm in the market for designer watches. 19) Refer to Figure 12-3. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged? B) $P1 C) SP2 $P3 20 Refer to Figure 12-3.What is the area that represents the loss made by the firm? B) the area P2cdP3 D) the area P1bcP2 A) the area POadP3 ) the area POacP2 21) Refer to Figure 12-3. Should the firm represented in the diagram continue to stay in business despite its losses? Yes, its total revenue covers its variable cost. B)No, it should shut down. C) Yes, it should increase its revenue by raising its price. D) No, it is not able to cover its fixed. cost. 22) Is a monopolistically competitive firm productively efficient? -By Yes, because it produces where marginal cost equals marginal revenue C) Yes, because price equals average total costs. D) No, because it does not produce at minimum average tot Ask a homework ques

Explanation / Answer

Q19
Answer
The price is found from demand curve at the output level
P=$P2
Option C
Q20
Answer
the loss =(ATC-P)*Q
the ATC=$P3
so the area of loss=P2P3dc
option B

Q21
Answer
Option A
yes to minimize losses by shutting down it should live in business in the short run
Q22
Answer
Option D
the P>min(ATC)
the production is efficient at the minimum average total cost

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