Figure 10.9
-Refer to Figure 10.9.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?
A)Panel A
B)Panel B
C)Panel C
D)Panel A and Panel B

Question

Figure 10.9 
-Refer to Figure 10.9.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?
A)Panel A 
B)Panel B 
C)Panel C 
D)Panel A and Panel B

Quizplus · Accepted Answer

In a monopolistically competitive market, firms can earn economic profits in the short run if the price they can charge (based on their perceived product differentiation) is above their average total cost. Both Panel A and Panel B depict situations where the price is above the average total cost at the profit-maximizing quantity, indicating economic profits.

Figure 10.9 -Refer to Figure 10.9.Which of the Graphs in the Figure