Graph 17-4
-Refer to Graph 17-4.Panel b in the set of figures shown is consistent with a firm in a monopolistically competitive market that is:

Question

Graph 17-4 
-Refer to Graph 17-4.Panel b in the set of figures shown is consistent with a firm in a monopolistically competitive market that is:

Quizplus · Accepted Answer

In panel b, the firm is producing at a quantity where marginal revenue equals marginal cost (Q1) and charging a price of P1. However, in the long run, new firms will enter the market due to economic profits, shifting the demand curve faced by the firm to the left, and causing it to produce at a lower quantity (Q2) and charge a lower price (P2). Therefore, the firm is in a short-run equilibrium but not in a long-run equilibrium.

Graph 17-4 -Refer to Graph 17-4.Panel B in the Set of Figures