Question 1 (a)
Graph for a monopolistically competitive company
- Since the company have excess capacity, it operates to the left of minimum-cost output
Question 1 (c)
In the long-run, economic profits will fall to zero for a monopolistically competitive company.
Question 1 (e)
In the long run, will the company be operating in a region where economies of scale exist? Explain.
One point is earned for stating yes.
One point is earned for explaining that the firm produces a quantity of output in the declining portion of its long-run ATC.