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
-In long-run equilibrium, the monopolistically competitive firm:
A)will break even.
B)will cease to advertise.
C)will earn a positive economic profit.
D)will face a perfectly elastic demand curve.
E)will no longer need to engage in non-price competition.

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
-In long-run equilibrium, the monopolistically competitive firm:
A)will break even. 
B)will cease to advertise. 
C)will earn a positive economic profit. 
D)will face a perfectly elastic demand curve. 
E)will no longer need to engage in non-price competition.

Quizplus · Accepted Answer

In long-run equilibrium, the monopolistically competitive firm will produce at the point where marginal revenue (MR) equals marginal cost (MC) and the price charged will be equal to the average total cost (ATC) at that point. In the given figure, that point is where MR intersects with MC, which also happens to be the minimum point of ATC. At this point, the firm will break even, earning zero economic profit. Therefore, choice A is the correct answer.

The Figure Given Below Shows the Cost and Revenue Curves