-Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D) , the company's marginal revenue curve (MR) , its marginal cost curve (MC) , and its average total cost curve (ATC) . Fresh Taste's markup is

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, the markup is the difference between the price a firm charges (found at the intersection of the MR and MC curves, then going up to the demand curve) and the marginal cost at that quantity. The markup is the vertical distance between the price on the demand curve and the MC curve at the chosen quantity. Without a specific graph provided, assuming typical scenarios where the demand curve is downward sloping and the MR curve lies below it, firms in monopolistic competition will set their price above marginal cost to maximize profit, indicating a positive markup. Since the exact numerical values are not provided, the correct answer relies on understanding that the markup in monopolistic competition is positive and determined by the difference between price and marginal cost at the profit-maximizing output.