These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph shown is producing Q1 and charging P3 in the long run,it is likely showing the cost and revenue curves of a firm in which type of market?

Question

These are the cost and revenue curves associated with a firm. 
Assuming the firm in the graph shown is producing Q1 and charging P3 in the long run,it is likely showing the cost and revenue curves of a firm in which type of market?

Quizplus · Accepted Answer

In monopolistic competition, firms produce differentiated products and have some market power to set their own prices. The demand curve they face is downward-sloping. In the long run, firms in monopolistic competition earn normal profits, indicated by the point where the average total cost (ATC) curve intersects with the demand curve. In this graph, the firm's long-run equilibrium is where it produces Q1 and charges P3, which is at the intersection of the ATC curve and the demand curve. Therefore, the cost and revenue curves shown in the graph are likely to be of a firm in monopolistic competition.

These Are the Cost and Revenue Curves Associated with a Firm