Figure 10.15 Figure 10.15 illustrates a monopolistically competitive firm. -Refer to Figure 10.15.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁? A)The firm wants to maximise accounting profit rather than economic profit. B)The firm would suffer an economic loss at Q₁ while it would break even at Q₀. C)The firm's marginal revenue would be negative at Q₁. D)Demand is not sufficient for consumers to buy Q₁.

Question

Quizplus · Accepted Answer

At Q₁, the firm's average cost of production is higher than the price it can charge for the product, resulting in an economic loss. Therefore, it is not profitable for the firm to expand its output beyond Q₀.

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