The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-Which of the following statements about the monopolistically competitive market, in the long run, is true?
A)The resources are efficiently utilized.
B)The firms make above-normal profit in the long run.
C)The marginal-revenue curve coincides with the demand curve facing the firm.
D)The firms produce the output level that is less than the output corresponding to the minimum of average total cost.
E)The firms operate on the upward-sloping portion of the long run average cost curve.

Question

The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
  D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-Which of the following statements about the monopolistically competitive market, in the long run, is true?
A)The resources are efficiently utilized. 
B)The firms make above-normal profit in the long run. 
C)The marginal-revenue curve coincides with the demand curve facing the firm. 
D)The firms produce the output level that is less than the output corresponding to the minimum of average total cost. 
E)The firms operate on the upward-sloping portion of the long run average cost curve.

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms produce the output level that is less than the output corresponding to the minimum of average total cost. This is because the firms operate on the upward-sloping portion of the long run average cost curve. The resources are not efficiently utilized and firms may or may not make above-normal profit in the long run depending on the level of product differentiation and competition. The marginal-revenue curve may or may not coincide with the demand curve facing the firm.

The Figure Given Below Shows the Cost and Revenue Curves