Suppose price falls to $34. Where should the firm produce, if at all? Does the firm maximize profit or minimize loss at that output level? How much?
Answer to relevant QuestionsSuppose the demand curve is downward sloping, as shown in the following table. Calculate marginal revenue at each output level. What is the relationship between cross elasticities of demand and the identification of specific goods to specific markets? Why is the demand curve for a firm in monopolistic competition downward sloping? Why do firms produce where MR = MC? Why not at the lowest point on their ATC curves? After all, it's the most efficient level of output. Inevitably, a firm in monopolistic competition ends up producing where its ATC curve is tangent to its demand curve. Explain.
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