Taggart Express Operates in a Monopolistically Competitive Industry

question 42

Multiple Choice

Taggart Express operates in a monopolistically competitive industry. Its inverse demand curve is P = 80 - Q. The total cost curve is TC = 20Q and marginal cost is constant at $20. What is the long-run equilibrium price?

• A) $60
• B) $75
• C) $50
• D) $20

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Definitions:

Monopolist

A single firm or entity that is the exclusive provider of a good or service, thus controlling its market price.

Lerner Indices

Measures of a firm’s market power based on the difference between price and marginal cost, normalized by the product's price.

Marginal Cost

The increase or decrease in the total cost incurred by producing one more unit of a good or service.

Lerner Index

A measure of a firm's market power, calculated as the difference between price and marginal cost, normalized by price.