Figure 16-2. The figure is drawn for a monopolistically competitive firm.

-Refer to Figure 16-2. Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve
A)with its minimum at the point (Q = 24, P = $36).
B)with its minimum at the point (Q = 24, P = $24).
C)tangent to the demand curve at the point (Q = 24, P = $36).
D)tangent to the demand curve at the point (Q = 32, P = $32).

Question

Figure 16-2. The figure is drawn for a monopolistically competitive firm.

-Refer to Figure 16-2. Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve
A)with its minimum at the point (Q = 24, P = $36). 
B)with its minimum at the point (Q = 24, P = $24). 
C)tangent to the demand curve at the point (Q = 24, P = $36). 
D)tangent to the demand curve at the point (Q = 32, P = $32).

Quizplus · Accepted Answer

In long-run equilibrium, the ATC curve is tangent to the demand curve at the point where the firm is producing at its most efficient scale, which is typically where the price equals the minimum average total cost.