Exhibit 9-2 A monopolistic competitive firm

-As presented in Exhibit 9-2,the long-run profit-maximizing output for the monopolistic competitive firm is:

Question

Exhibit 9-2 A monopolistic competitive firm
 
-As presented in Exhibit 9-2,the long-run profit-maximizing output for the monopolistic competitive firm is:

Quizplus · Accepted Answer

In the long run, monopolistic competitive firms enter or exit the market until they earn only normal profit. For a monopolistic competitive firm, the long-run equilibrium occurs where the firms produce the quantity where marginal revenue (MR) equals marginal cost (MC) and sets a price that covers the average total cost (ATC).

From the given exhibit, we see that the MC curve intersects the MR curve at output level Q=200. At this output level, the firm charges a price P= $16, which is where the demand curve also intersects.

Therefore, the long-run profit-maximizing output for the monopolistic competitive firm is 200 units per week.

Exhibit 9-2 a Monopolistic Competitive Firm