Below are data for a monopolistically competitive firm.

-Refer to the information above to answer this question.What is true if the firm is producing at the profit-maximizing output?

Question

Below are data for a monopolistically competitive firm.
 
-Refer to the information above to answer this question.What is true if the firm is producing at the profit-maximizing output?

Quizplus · Accepted Answer

In monopolistic competition, the profit-maximizing output is where marginal revenue equals marginal cost (MR=MC). At this output level, the price charged will be greater than the marginal cost, indicating that the firm has some market power. Therefore, the firm is not achieving allocative efficiency since price is not equal to marginal cost. Additionally, the firm is not operating at the minimum point of the average total cost curve, indicating that it has excess capacity. Therefore, the correct choice is D.

Below Are Data for a Monopolistically Competitive Firm