4. Is monopolistic tition efficient? revenue (MR) curve, marginal cost (MC) curv

Question

4. Is monopolistic tition efficient? 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. TC MR 10 30405?60708000100 QUANTITY (Thousands of engines) Because this market is a monopolistically competitive market, you can tell that it is in long-cun equilibrium by the fact that optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is at the v the efficient scale.

Explanation / Answer

In long run under monopolistically competitive firm, price=ATC because in long run firm cannot earn economic profit or loss because of free entry and exit.

Thus P=ATC

But the quantity produced is less than efficient output because efficient output is at a point where ATC is minimised.

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