Figure 16-5
-Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Question

Figure 16-5 
-Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Quizplus · Accepted Answer

Panel b shows that the firm is producing at a quantity (Q1) where marginal cost (MC) is greater than marginal revenue (MR). In a monopolistically competitive market, firms earn zero economic profit in the long run when they produce at the minimum point on their average total cost curve (ATC). However, the firm in panel b is not producing at the minimum point on its ATC curve, indicating that it is not in long-run equilibrium. Additionally, the fact that the firm is earning a positive economic profit suggests that it has some market power, which is also inconsistent with long-run equilibrium in a perfectly competitive market. Therefore, the best choice is A - the firm is not in long-run equilibrium.

Figure 16-5 -Refer to Figure 16-5. Panel B Is Consistent with a Consistent