3. Is monopolistic competition efficient? Aa Aa Suppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average cost curve (AC). Place a tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a red point (cross symbol) to indicate the minimum unit cost the firm faces and the quantity associated with that cost. Dashed drop lines will automatically extend to both axes PRICE (Dollars per engine] 20 18 16 14 12 10 MonComp Outcome MC Min Unit Cost AC Demand MR 5 10 15 20 25 30 35 40 45 50 QUANTITY (1000s of engines per month Help Clear All Because this market is a monopolistically competitive market, the firm's average cost in long-run equilibrium is the minimum unit cost
A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.
B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.
C. Monopolies can earn profits in the long run while perfectly competitive firms break even.
D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.
40. Which of the following statements is not correct?
A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.
B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.
C. Only competitive firms produce the welfare-maximizing level of output.
D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.
43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that
A. the profits of the firm are negative.
B. firms are likely to leave this market in the long run.