Costume jewellery is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that:

Question

Quizplus · Accepted Answer

Since the MR equals MC at 700 necklaces, the producer is producing at the profit-maximizing level of output. However, we cannot determine the price of the necklaces. Since the market structure is monopolistically competitive, the producer has some degree of market power and charges a price higher than the marginal cost. Therefore, option C is the correct choice. Option A is incorrect, as we do not have information to determine the price. Option B is incorrect, as the question provides no information about total costs. Option D is also incorrect, as we do not have information about the barriers to entry into the market.

Costume Jewellery Is Produced in a Monopolistically Competitive Market