The diagram above represents a monopolistically competitive firm. Answer the questions below. Is this firm operating in the short-run or long-run? How do you know? Calculate this firm’s accounting profit. From the diagram, what is the productively efficient output for this firm? From the diagram, economies of scale are maximized at which output level? Explain. From the diagram, what is the allocatively efficient output for this firm? Explain. Priceand costper unitP₁P3P₂P₁S0 Q₁TR20Q₂MRQ3MCDemandATCQuantity

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Answered: The diagram above represents a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The diagram above represents a monopolistically competitive firm. Answer the questions below.

Is this firm operating in the short-run or long-run? How do you know?
Calculate this firm’s accounting profit.
From the diagram, what is the productively efficient output for this firm?
From the diagram, economies of scale are maximized at which output level? Explain.
From the diagram, what is the allocatively efficient output for this firm? Explain.

Price
and cost
per unit
P₁
P3
P₂
P₁
S
0 Q₁
T
R
20
Q₂
MR
Q3
MC
Demand
ATC
Quantity

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