-Ralph's "Roll Free Rolling Pin" factory used to be the only business of its type but now faces many competitors in its market, each having a similar but differentiated product. Which of the panels in Exhibit K-4 is the most appropriate representation of Ralph's long-run situation producing "q" units of output?
A) Panel 1
B) Panel 2
C) Panel 3
D) Panel 4
E) Panel 5

Question

-Ralph's "Roll Free Rolling Pin" factory used to be the only business of its type but now faces many competitors in its market, each having a similar but differentiated product. Which of the panels in Exhibit K-4 is the most appropriate representation of Ralph's long-run situation producing "q" units of output?
A) Panel 1 
B) Panel 2 
C) Panel 3 
D) Panel 4 
E) Panel 5

Quizplus · Accepted Answer

Panel 3 is the most appropriate representation because it depicts a situation of monopolistic competition, where many firms compete with differentiated products, which aligns with Ralph's situation of facing many competitors with similar but differentiated rolling pins.

-Ralph's "Roll Free Rolling Pin" Factory Used to Be the Only