Monopolistic Competition Use the information below to answer the next 3 question

Question

Monopolistic Competition Use the information below to answer the next 3 questions. Brookside is a producer of golf clubs in a monopolistically competitive industry. The figure below shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for Brookside. Price and cost (dollars per club) 220 ATC MC 160- 140 120 100 80 60 200 0 40 80 120 160 200 240 280 320 360 400 440 Quantity (thousands of golf clubs per year) 9. What is the value of Brookside's excess capacity? b. 160 c. 240 d. 80

Explanation / Answer

Answer

The optimum capacity is producing at minimum average total cost, MC=ATC

at this place the Q=240 and the firm producing at MR=MC where Q=160

the excess capacity=240-160=80 thousands

option d

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