Use the figure below to answer the following questions.

Figure 14.2.4
-Refer to Figure 14.2.4. The figure represents a monopolistically competitive firm in short-run equilibrium. What is the firm's level of output?

Question

Use the figure below to answer the following questions.
  
Figure 14.2.4
-Refer to Figure 14.2.4. The figure represents a monopolistically competitive firm in short-run equilibrium. What is the firm's level of output?

Quizplus · Accepted Answer

In monopolistically competitive markets, firms produce where marginal revenue (MR) equals marginal cost (MC) and charge a price above their average total cost (ATC). In the figure, the firm's marginal cost intersects its marginal revenue at output level Q₂. At this level, the firm charges a price of P₂, which is higher than its average total cost of production. Therefore, B) Q₂ is the correct answer.

Use the Figure Below to Answer the Following Questions