Question

Price and cost per unit ATC AVC Demand Quantity The figure above represents a firm in a monopolistic competition a. What is the firm's profit-maximizing or loss-minimizing output (0.5 point) b. What is the price they are going to charge at the output from part a) (0.5 point) c. What is the ATC they are subjected to at the output from part a) (0.5 point) d. Is this firm earning a loss or profit? What is it equal to You can use the letters provided, so for example - PoaQ,0? Also shade this region on the graph. (1.5 points) e. What is total cost equal to at the quantity from part a). You can use the letters provided (so for example - PoaQ.0) (0.5 point)

Answer 1

A) Setting MC=MR for profit maximization, output = Qa

B) The price charged = P2

C) ATC = P3

D) The firm is earning a loss as ATC>P

= P3dcP2

Price MC and cost АTC per unit AVC Ps 3 P2 b P1 Pо Demand MR Quantity

E) Total cost = P3dQa0