Asked by Svetlana Brenner on Jun 24, 2024
Verified
If the representative firm in a monopolistically competitive industry has an optimal output where P < ATC, the industry will expand in the long run.
Monopolistically Competitive
An economic scenario where multiple companies offer products that are alike but not exactly the same, providing them with a certain level of influence over the market.
P < ATC
A situation where the price of a good is less than the average total cost of producing that good, indicating a potential loss to the firm.
Optimal Output
The level of production where marginal cost is equal to marginal revenue, maximizing profit or utility.
- Identify the characteristics and outcomes of monopolistic competition, including product variety and firms’ profitability.
- Understand the short-run and long-run adjustments in monopolistically competitive markets and their impact on firms and industries.
Verified Answer
Learning Objectives
- Identify the characteristics and outcomes of monopolistic competition, including product variety and firms’ profitability.
- Understand the short-run and long-run adjustments in monopolistically competitive markets and their impact on firms and industries.
Related questions
As New Firms Enter a Monopolistically Competitive Market, the Demand ...
That One Thing That Monopolistic Competition Provides, Which Is Not ...
Monopolistic Competition Is Different from Monopoly Because Firms ...
When an Industry Has Many Firms, the Industry Is ...
Monopolistic Competition Describes an Industry Characterized By ...