Figure 11-14
Figure 11-14 illustrates a monopolistically competitive firm.
-Refer to Figure 11-14.Which of the following statements describes the firm depicted in the diagram?

Question

Figure 11-14
  Figure 11-14 illustrates a monopolistically competitive firm.
-Refer to Figure 11-14.Which of the following statements describes the firm depicted in the diagram?

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms will enter or exit the industry until they are making zero economic profit. In the diagram, the firm is producing at the point where price equals marginal cost (Q₀), indicating that it is in the short run. However, the diagram also shows the long-run equilibrium point where the firm is making zero economic profit at Q₁. Therefore, D is the correct answer as the firm is in long-run equilibrium and is breaking even.

Figure 11-14 Figure 11-14 Illustrates a Monopolistically Competitive Firm