Suppose That a Monopolistically Competitive Firm Is in Long-Run Equilibrium

question 108

Multiple Choice

Suppose that a monopolistically competitive firm is in long-run equilibrium.The firm's demand curve is tangent to its average cost curve at Q = 25.Average cost is minimized at Q = 35, where average cost is $50.Which of the following is true?

• A)This firm maximizes profit at an output level of 25 units.
• B)This firm maximizes profit at an output level of 35 units.
• C)This firm maximizes profit at an output level less than 25 units.
• D)This firm maximizes profit at an output level greater than 35 units.
• E)There is not enough information to find the firm's profit-maximizing level of output.

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Definitions:

Shares of the Business

Equity units of a corporation that represent ownership interest held by shareholders, giving them a claim on the company's profits in the form of dividends.

Stock

A type of financial security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.