The following graphs show two firms operating in a monopolistically competitive market. In Graph A, the profit-maximizing firm is making a profit, shown by the area _____.

Question

Quizplus · Accepted Answer

The area representing profit in a graph for a monopolistically competitive firm is the area between the average total cost curve and the demand curve, over the quantity of output produced. This area is typically above the average total cost curve and below the price level, which corresponds to the description in option B.

The Following Graphs Show Two Firms Operating in a Monopolistically