A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

Question

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The firm is operating at a loss because the price ($4.00) is less than the average total cost ($4.50), meaning it does not cover the total cost per unit sold.

A Monopolistically Competitive Firm Is Producing at an Output Level