Figure 11.11 -Refer to Figure 11.11.The Diagram Demonstrates That

Figure 11.11

-Refer to Figure 11.11.The diagram demonstrates that

A) in the short run, the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Qₐ.
B) it is not possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, because of product differentiation.
C) it is possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, if it is willing to lower its price from Pb to Pₐ.
D) in the long run, the monopolistic competitor produces the minimum-cost output level, Qₐ, but in the short run its output of Qb is not cost minimizing.