Suppose that a firm produces wooden train engines 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. PRICE (Dollars per engine) 100 90 80 70 60 50 40 30 20 10 MC 0 0 10 ATC O True MR Demand 20 30 40 50 60 70 80 QUANTITY (Thousands of engines) Falce 90 100 Mon Comp Outcome Min Unit Cost True or False: This indicates that there is excess capacity in the market for engines. at the 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 the quantity at which firms minimize average total cost. True or False: This indicates that there is excess capacity in the market for engines. 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 average total cost. the quantity at p O True O False P> ATC MR > MC P = ATC MR = MC at the minimize equal to greater than less than
Suppose that a firm produces wooden train engines 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. PRICE (Dollars per engine) 100 90 80 70 60 50 40 30 20 10 MC 0 0 10 ATC O True MR Demand 20 30 40 50 60 70 80 QUANTITY (Thousands of engines) Falce 90 100 Mon Comp Outcome Min Unit Cost True or False: This indicates that there is excess capacity in the market for engines. at the 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 the quantity at which firms minimize average total cost. True or False: This indicates that there is excess capacity in the market for engines. 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 average total cost. the quantity at p O True O False P> ATC MR > MC P = ATC MR = MC at the minimize equal to greater than less than
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that a firm produces wooden train engines 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.
PRICE (Dollars per engine)
100
90
80
70
60
50
40
30
20
10 MC
0
0
10
O True
ATC
Demand
False
MR
20 30 40 50 60 70 80
QUANTITY (Thousands of engines)
90
100
Mon Comp Outcome
Min Unit Cost
True or False: This indicates that there is excess capacity in the market for engines.
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
average total cost.
True or False: This indicates that there is excess capacity in the market for engines.
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
average total cost.
the quantity at
O True
False
P > ATC
MR > MC
P = ATC
MR = MC
at the
minimize
equal to
greater than
less than
at the
the quantity at which firms minimize
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