Suppose that a firm in a monopolistically competitive market is operating at its profit-maximizing point in the long run. The firm has a total revenue of $800, its marginal revenue is $10, and it sells 50 units of output. Given this, we can conclude that the average total cost of the firm is _____ and the marginal cost of production is:

Question

Quizplus · Accepted Answer

In the long run, a monopolistically competitive firm earns zero economic profit, so average total cost equals average revenue, which is total revenue divided by quantity ($800/50 = $16). At the profit-maximizing point, marginal cost equals marginal revenue, which is $10.

Suppose That a Firm in a Monopolistically Competitive Market Is