Based on your answer to Problem 25-3, is the firm with the revenue and cost conditions depicted in Problem 25-2 charging a price in excess of the minimum price necessary to induce it to provide this good in long-run equilibrium? Explain your reasoning.

Problem 25-2

Consider the diagram depicting the demand and cost conditions faced by a monopolistically com- petitive firm.

a. What are the total revenues, total costs, and economic profits experienced by this firm?

b. Is this firm more likely in short- or long-run equilibrium? Explain.

Transcribed Image Text:

Revenues and Costs ($ per unit) 28 25 22 20 0 MR 100 160 Output (units per day) MC ATC