1. Draw a figure for a monopolistic competitive firm that faces a demand curve of:

Q = 0.2 (55 -P)

And face the following cost schedule:

Quantity of Output	Price	TR	MR	TVC	TFC	TC	MC	ATC	TP
0	55	0	-	0	30	30	-	-	-30
1	50	50	50	20	30	50	20	50	0
2	45	90	40	30	30	60	10	30	30
3	40	120	30	45	30	75	15	25	45
4	35	140	20	80	30	110	35	27.5	30
5	30	150	10	145	30	175	65	35	-25

1. Plotting the relevant curves show the optimum level of output for the firm.

b) Does the firm realize any economic profit?

c) Using appropriate charts, show what will happen to this firm in the long run?

1. 
   

Answer rating: 100% (QA)

Excess capacityWhen there is downward sloping demand curve ... View the full answer