4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. 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 kit) 100 90 80 70 50 9 20 10 0 0 MC 10 ATC MR 20 30 40 50 60 70 QUANTITY (Thousands of kits) 80 Demand 90 100 Mon Comp Outcome Min Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that for each firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is cost. at the optimal quantity the minimum average total

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4. Is monopolistic competition efficient?
Suppose that a company operates in the monopolistically competitive market for rugby kits. The following graph shows the demand curve, marginal
revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.
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 kit)
100
90
80
70
60
50
40
30
20
10
0
0
MC
10
True
ATC
False
MR
20 30 40 50 60 70
QUANTITY (Thousands of kits)
80
Demand
90 100
Mon Comp Outcome
Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that
for each firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is
cost.
Min Unit Cost
True or False: This indicates that there is excess capacity in the market for kits.
at the optimal quantity
the minimum average total
Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the
externality implies that there is too little entry of new firms in the market.
Transcribed Image Text:4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. 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 kit) 100 90 80 70 60 50 40 30 20 10 0 0 MC 10 True ATC False MR 20 30 40 50 60 70 QUANTITY (Thousands of kits) 80 Demand 90 100 Mon Comp Outcome Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that for each firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is cost. Min Unit Cost True or False: This indicates that there is excess capacity in the market for kits. at the optimal quantity the minimum average total Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the externality implies that there is too little entry of new firms in the market.
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