Refer to the Graph Shown of a Monopolistically Competitive Firm

question 33

Multiple Choice

Refer to the graph shown of a monopolistically competitive firm. If the firm maximizes profit, it will:

• A) produce 8,000 dresses per year.
• B) produce 5,000 dresses per year.
• C) produce 12,000 dresses per year.
• D) go out of business because it cannot earn a profit.

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Definitions:

Price Support

Price set by government above free-market level and maintained by governmental purchases of excess supply.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual higher market price they receive.

Market Equilibrium

A condition in a market where the quantity demanded equals the quantity supplied, leading to no pressure for price to change.

Minimum Price

The lowest possible price at which a good or service can be sold, often set by legal or regulatory authorities to protect producers or consumers.