Figure 10.18 -Refer to Figure 10.18.The diagram demonstrates that A)in the short run, the monopolistic competitor produces an output Q_b, but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Q_a. B)it is not possible for a monopolistic competitor to produce the productively efficient output level, Q_a,because of product differentiation. C)it is possible for a monopolistic competitor to produce the productively efficient output level, Q_a,if it is willing to lower its price from P_bto P_a. D)in the long run, the monopolistic competitor produces the minimum-cost output level, Q_a,but in the short run its output of Q_b is not cost minimising.

Question

Quizplus · Accepted Answer

Monopolistic competitors cannot produce at the productively efficient output level due to product differentiation, which leads to excess capacity and prevents them from achieving minimum average total cost.

Figure 10.18 -Refer to Figure 10.18.The Diagram Demonstrates That