2. Understanding excess capacity

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2. Understanding excess capacity

The following table shows the daily cost data and demand schedule for a typical firm producing board games in a monopolistically competitive market in the short run.

Fill in the values in the Marginal Cost, Total Revenue, and Marginal Revenue columns in the following table and then answer the questions that follow.

Under monopolistic competition, a typical firm will produce ___ board games at a price of ___ per board game in the short run.

Based on your calculations, the firm will ___.

Fill in the Average Total Cost column in the previous table.

Based on your calculations, the level of excess capacity in this monopolistically competitive market is ____.

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Answer 1

Answer #1

The following table shows the daily cost data and demand schedule for a typical firm producing board games in a monopolistically competitive market in the short run.

Fill in the values in the Marginal Cost, Total Revenue, and Marginal Revenue columns in the following table and then answer the questions that follow.

Under monopolistic competition, a typical firm will produce 3 board games at a price of $12 per board game in the short run.

Based on your calculations, the firm will earn a profit of $9.

Fill in the Average Total Cost column in the previous table.

Based on your calculations, the level of excess capacity in this monopolistically competitive market is 1 board game.

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2. Understanding excess capacity

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