1000
S
900
800
700
600
500
400
300
200
100
MC
ATC
D
MR
5 10 15 20 25 30 35 40 Quantity
34. Refer to Figure#4. This figure depicts a situation in a monopolistically competitive market. In short-run, what price will the
monopolistically competitive firm charge in this market?
a. $300.
b. $400.
c. $500.
d. $600.
35. Refer to Figure#4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total
costs of approximately
a. $2,000.
b. $3,000.
c. $4,000.
d. $5,000
36. Refer to Figure #4. Assume the firm in the figure is currently producing 8 units of output and charging $400. The firm
a. will increase its profits if it raises its price and reduces its production level.
b. will increase its profits if it lowers its price and expands its production level.
c. is maximizing profits.
d. will increase its profits if it raises its prices and expands its production level.
37. Which of the following best describes the idea of excess capacity in monopolistic competition?
a. Firms produce more output than is socially desirable.
b. Due to product differentiation, firms choose output levels where P > ATC.
c. Firms keep some surplus output on hand in case there is a shift in the demand for their product.
d. The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve.