Suppose that a monopolistically competitive firm is in long-run equilibrium. The

Question

Suppose that a monopolistically competitive firm is in long-run equilibrium. The firm's demand curve is tangent to its average cost curve at Q = 25. Average cost is minimized at Q = 35, where average cost is $50. Which of the following is true?
Answer
This firm charges $50 for the good.
This firm charges more than $50 for the good.
This firm charges less than $50 for the good.
The firm has excess capacity at all output levels greater than 35 units.
Average cost is $50 at the profit-maximizing output level.

Explanation / Answer

The firm has excess capacity at all output levels greater than 35 units.

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