The Diagram Below Shows Selected Cost and Revenue Curves for a Firm

question 46

Multiple Choice

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry.
FIGURE 11-4
-Refer to Figure 11-4.How is the excess-capacity theorem demonstrated in this diagram?

• A)The short-run equilibrium occurs where the firm is producing output at q0,which is less than that corresponding to the lowest point on its LRAC curve.
• B)The long-run equilibrium occurs where the firm is producing output at q1,which is the same as for a perfectly competitive industry.
• C)In long-run equilibrium the firm is earning positive profits,but has unexploited economies of scale.
• D)In long-run equilibrium,this firm has excess capacity because they are selling output at a price below their LRAC.
• E)The long-run equilibrium occurs where the firm is producing output at q0,which is less than that corresponding to the lowest point on its LRAC curve.

---

Definitions:

Battle Casualties

The number of soldiers wounded, killed, captured, or missing in action during a military engagement.

Carrie Chapman-Catt

A leading American women's suffrage advocate who played a pivotal role in the movement to secure women the right to vote.

Right to Vote

A civil right that enables an individual to participate in the election process, often seen as a fundamental aspect of a democratic society.

Teller Amendment

An amendment to a joint resolution of the United States Congress, enacted in 1898, stipulating that the United States could not annex Cuba but only leave "control of the island to its people."