The diagram at right shows the structure of cost and demand facinga monopolistic
ID: 1117138 • Letter: T
Question
The diagram at right shows the structure of cost and demand facinga monopolistically competitive firm in the short run The profit-maximizing output level isunits of output. (Enter your response as an integer.) The profit-maximizing price is $ (Enter your response as an integer) Total revenue is $ . (Enter your response as an integer) Total cost is $. (Enter your response as an integer.) Total profit or loss is $ . (Enter your response as an integer and include a ATC $15 $12 $8 negative sign where appropriate.) In the long run, firms will 0 A. enter, shifting the demand facing the remaining firms to the left until the MR 20 25 firms earn a normal profit. Quantity B. enter, shifting the demand facing the remaining firms to the left until the ° C. exit, shifting the demand facing the remaining firms to the right until the 0 D. exit, shifting the demand facing the remaining firms to the right until the firms earn an economic profit. firms earn a normal profit. firms earn an economic profit.Explanation / Answer
Answer
the firm maximizes profit at MR=MC
where
profit-maximizing output level is 20 units
and
price is $$13
Total revenue=P*Q=13*20=$260
total cost=ATC*Q=15*20=$300
profit=total revenue-total cost=300-260=-40
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option D
some firms exit the industry so the demand share of each firm increases.