Exhibit 14-5 The graph depicts a monopolistically competitive firm's demand,marginal revenue,and cost curves. Refer to Exhibit 14-5.The monopolistically competitive firm depicted is:
A) operating in the short run.
B) operating in the long run.
C) operating either in the short-run or the long-run period.
D) earning an above normal profit.

Question

Exhibit 14-5 The graph depicts a monopolistically competitive firm's demand,marginal revenue,and cost curves.  Refer to Exhibit 14-5.The monopolistically competitive firm depicted is:
A) operating in the short run. 
B) operating in the long run. 
C) operating either in the short-run or the long-run period. 
D) earning an above normal profit.

Quizplus · Accepted Answer

The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves. Since the firm is currently producing output where MR=MC and charging a price above the average variable cost, it is earning a positive profit in the short run. The graph does not provide information about the long-run equilibrium, so it cannot be determined whether the firm will continue to earn above-normal profits in the long run. Therefore, the answer is A, operating in the short run.

Exhibit 14-5 the Graph Depicts a Monopolistically Competitive Firm's Demand,marginal