Tombstones are produced in a monopolistic competitive market. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. From this information, we can tell:

Question

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The producer's price of $500 is below its average total cost of $600, indicating that it is incurring losses of $100 per unit sold. With 20 units sold per week, the producer is losing $2,000 per week. This suggests that new firms are unlikely to enter the market, as they would also face losses. The producer is not making an economic profit (answer C), setting MR = MC (answer D), or producing at the optimal level (answer E).

Tombstones Are Produced in a Monopolistic Competitive Market