Figure 16-4

-Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Question

Figure 16-4
 
-Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Quizplus · Accepted Answer

Panel b shows that the firm is producing at a quantity where marginal cost is less than average total cost, indicating that the firm is not producing its efficient scale of output. This results in excess capacity and suggests that the firm is not in long-run equilibrium. Additionally, since price is above average total cost, the firm is earning positive economic profit.

Figure 16-4 -Refer to Figure 16-4.Panel B Is Consistent with a Firm