Please give full answer that is understandable 3. Is monopolistic competition ef

Question

Please give full answer that is understandable

3. Is monopolistic competition efficient? Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 100 T 90 Mon Comp Outcome 80 70 60 50 t Min Unit Cost 40 r 30 0. 201 Demand 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets)

Explanation / Answer

Because this market is a monopolistically competitive market, you can tell that it is in long run equilibrium by the fact that MR=MC at the optimal quantity.Furthermore, a monopolistically competitive firm's averagre total cost in long run equilibrium is greater than the minimum ATC.

This indicates that there is a markup on MC. True

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