The figure given below shows revenue and cost curves of a monopolistically compe
ID: 1207042 • Letter: T
Question
The figure given below shows revenue and cost curves of a monopolistically competitive firm. In the figure, MR: Marginal revenue curve ATC: Average total cost curve AVC: Average variable cost curve MC: Marginal cost curve The monopolistically competitive firm described in the Figure 1: The profit-maximizing output level and price are________and_________respectively. Answer:______________According to Figure 1, the profit-maximizing firm is making an average: Profit on each unit produced, equal to the distance BG. Loss on each unit produced, equal to the distance DG. Profit on each unit produced, equal to the distance CE. Loss on each unit produced, equal to the distance AC. Answer:___________________Explanation / Answer
a. H and D
profit maximising quantity is where MR=MC
Price is determined where this quantity intersects the demand curve.
b. Average loss of DG because price is less that ATC.
ATC-Price =loss/unit.