Use the following to answer questions:
Figure: Monopolistic Competition II
-(Figure: Monopolistic Competition II) Panel _____ in the figure Monopolistic Competition II shows a monopolistic competitor earning a loss in the short run.
A) (a)
B) (b)
C) (c)
D) None of the panels shows a loss in the short run.

Question

Use the following to answer questions:
Figure: Monopolistic Competition II 
-(Figure: Monopolistic Competition II) Panel _____ in the figure Monopolistic Competition II shows a monopolistic competitor earning a loss in the short run.
A) (a) 
B) (b) 
C) (c) 
D) None of the panels shows a loss in the short run.

Quizplus · Accepted Answer

Panel (b) shows a monopolistic competitor earning a loss in the short run because the average total cost (ATC) curve is above the demand curve at the quantity where marginal cost (MC) equals marginal revenue (MR), indicating that the price is less than the ATC.

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