Refer to the above graph.This monopolistically competitive firm is:
A) suffering an economic loss.
B) earning an economic profit.
C) allocatively and productively efficient.
D) neither allocatively nor productively efficient.

Question

Refer to the above graph.This monopolistically competitive firm is:
A) suffering an economic loss. 
B) earning an economic profit. 
C) allocatively and productively efficient. 
D) neither allocatively nor productively efficient.

Quizplus · Accepted Answer

The firm is producing at a quantity where marginal cost is less than price, indicating that it is not allocatively efficient. Additionally, it is producing at a level where the average total cost exceeds price, indicating that it is not productively efficient. Therefore, the firm is neither allocatively nor productively efficient.

Refer to the Above Graph