Figure 10.15 Figure 10.15 illustrates a monopolistically competitive firm. -Refer to Figure 10.15.Which of the following statements describes the firm depicted in the diagram? A)The firm is making no economic profit and will exit the industry. B)The firm is suffering an economic loss by producing at Q₀ but will break even it increases its output to Q₁. C)The firm achieves productive efficiency by producing at Q₀. D)The firm is in long-run equilibrium and is breaking even.

Question

Quizplus · Accepted Answer

The firm is producing at the point where MR=MC, which is also the point where ATC is tangent to demand. This implies that the firm is in long-run equilibrium and is breaking even, as P=ATC. There is no incentive for the firm to exit the industry or adjust its output level in the short run.

Figure 1015 Figure 10