Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 100 90 Mon Comp Outcome 80 70 60 Min Unit Cost ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bats) PRICE (Dollars per bat)
Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 100 90 Mon Comp Outcome 80 70 60 Min Unit Cost ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bats) PRICE (Dollars per bat)
Chapter14: Monopolistic Competition And Product Differentiation
Section: Chapter Questions
Problem 5P
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Transcribed Image Text:Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue
(MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve.
Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,
place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.
100
90
Mon Comp Outcome
80
70
60
Min Unit Cost
50
ATC
40
30
20
10
MC
MR
Demand
10
20
30
40
50
60
70
80
90
100
QUANTITY (Thousands of bats)
PRICE (Dollars per bat)
Transcribed Image Text:Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that
optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium is
at the
the quantity at which firms minimize
average total cost.
True or False: In the long-run equilibrium, a monopolistically competitive firm charges a price equal to marginal cost.
O True
False
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