ENGAGE Mework (Ch 16) Average 2074 4. Is Monopolistic Competition Efficient? Suppose That A Firm Produces Wooden Train Engines In A Monopolistically Competitive Market. The Following Graph Shows Its Demand Curve, Marg Revenue (MR) Curve, Marginal Cost (MC) Curve, And Average Total Cost (ATC) Curve. Place A Black Point (Plus Symbol) On The Graph To Indicate

 

LENGAGE mework (Ch 16) Lempos. Average. 2014 4. Is monopolistic competition efficient? Suppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marg revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. A place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 888 100 PRICE (Dollars per engine) 288 RR 70 60 50 30 20 40 ATC 10 MO DO 90 100 MR Dergand 0 10 20 30 40 50 60 70 QUANTITY (Thousands of engines) Mon Comp Outcome * Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that P ATC at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is True or False: This indicates that there is a markup on marginal cost in the market for engines True False the efficient scale. Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the product variety externality implies that there is too little entry of new firms in the market.