- Refer to Figure 26

question 29

Multiple Choice

- Refer to Figure 26.3 for a monopolistically competitive firm in the long run.Which of the following observations results in the problem of excess capacity?

• A)The firm is producing less than the minimum-ATC output rate.
• B)The firm is producing at Q₃ instead of where MR = MC.
• C)The firm is earning only zero economic profits in the long run.

---

Definitions:

Equity Method

An accounting technique used by a company to record its investment in another company, typically when it has significant influence but does not fully control it, usually through owning 20% to 50% of the voting stock.

Common Stock

Represents ownership shares in a corporation, giving holders voting rights and a share in the company’s profits through dividends.

Goodwill

An intangible asset that represents the excess value paid over the fair market value of an acquired company's net assets.

Equity Method

A financial recording method where investments in other firms are first noted at their purchase price and later modified to reflect the investor's portion of the investee's earnings or losses.