Is monopolistic competition efficient?

1. SHADE THE GRAPH (using the following information):

Suppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal 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.

Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.

PRICE (Dollars per shirt) 100 90 80 70 60 50 40 30 20 10 10 20 30 40 50 60 70 QUANTITY (Thousands of shirts) 80 Demand 90 100 = 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 W at the optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium is W the efficient scale. equal to greater than Because this market is a monopolistically competitive market, you can tell that it is in lo m by the fact that W at the optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium is W the efficient scale