Monopolistic Competition in the Market for Good X The Market for Good X is chara
ID: 1125918 • Letter: M
Question
Monopolistic Competition in the Market for Good X The Market for Good X is characterized by monopolistic competition. There are no extenal or benefits generated by the production and consumption of X. The graph below depicts the demand and cost structure of a typical firm in this market MC ATC MRX A. This firm will maximize its Total Revenue (TR) if it produces at B. This firm's level of Average Fixed Costs (AFC) will be lowest at C. At which production point will this firm achieve productive efficiency? D. At which production point will economic (allocative) efficiency be attained? 1. q(1) 2. q(2) 3. q(3) 4.9(4) 1. q1) 2. 9(2) 3. q(3) 4. q(4) 1. q(1) 2. 9(2) 3. q(3) 4. q(4) E At which production point will this firm break even (i.e, eam zero economic profits)? F. At which production point is this firm maximizing profits? 1. q(1) 2.q(2) 3. q(3)4. q(4) G. Identify, on the graph, the price- Px*-that this firm will charge when it maximizes profits. H. Shade/color in the area in this graph that represents the Deadweight Loss of Economic Surplus that this firm imposes on the economy. Identify this shaded area as "DWLExplanation / Answer
A) 2. Tr is max when mr=0
B)4. Afc decreases as Q increases.
C)4 because ATC is minimum
D)3. Because AD and Mc intersect
E)1. At breakeven P=atc
F)1 because Mr=Mc at profit max.