00:01
So here we're talking about monopolistic competition and the first thing i want to do is replicate that diagram, right? we have a relationship between quantity and price.
00:09
We have a demand curve.
00:12
We have a marginal revenue curve that looks something like this.
00:17
We have a marginal cost curve in green that looks like this.
00:21
And then we have an average total cost curve and that average total cost curve looks something like this, average total cost.
00:32
So for part what we want to do, right, the goal for the firm is to set marginal revenue equals to marginal cost.
00:39
So the firm is going to want to produce at this point, right? and if you look at that point, you can see that it's a quantity of four.
00:47
If you follow that point up, you see that it goes to this intersection here and at that point it gives us a price of five, right? that's going to be the optimal point based on this marginal revenue, marginal cost optimization.
01:04
So based on this point, right, what do we know? we know that average total cost will be five because that's the average total cost at q equals four, right? at q is equal to four...