Figure 13-8 Figure 13-8 illustrates a monopolistically competitive firm. -Refer to Figure 13-8.Which of the following statements describes the firm depicted in the diagram? A)The firm is making no economic profit and will exit the industry. B)The firm is suffering an economic loss by producing at Q₀ but will break even it increases its output to Q₁. C)The firm achieves productive efficiency by producing at Q₀. D)The firm is in long-run equilibrium and is breaking even.

Question

Quizplus · Accepted Answer

The firm is producing where marginal revenue equals marginal cost (MR=MC) at Q₀, indicating productive efficiency. At this level of output and price, the firm is earning zero economic profit, which is the characteristic of long-run equilibrium in monopolistic competition. Therefore, the correct choice is D - the firm is in long-run equilibrium and is breaking even.

Figure 13-8 Figure 13-8 Illustrates a Monopolistically Competitive Firm