Monopolistic competition creates inefficiency because of the markups and excess capacity. The graph below depicts the situation for a hypothetical monopolistically competitive firm. The curves included in the graph are demand (D), marginal revenue (MR), average total cost (ATC), and marginal cost (MC). The graph is not graded, but you can move the point labeled P to help you find the numeric values to answer the questions. 1. What is the size of the markup on the price? Number $[]

2. What is the size of the excess capacity? Number $[] units

Transcribed Image Text:

Price $ 80 MC MR 45 P ATC Quantity Price $ 80 MC MR 45 P ATC Quantity

Answer rating: 100% (QA)

Mark up A markup rule is the pricing practice of a producer with market power where a fir... View the full answer