The diagram below shows the long-run equilibrium position of a typical firm operating in a monopolistically competitive retail market.
Based on the diagram, which of the following statements is correct regarding the firm's efficiency and output in the long run?
The firm achieves allocative efficiency at an output of 500500500 units because price equals marginal cost at this point.
The firm earns a supernormal profit of £1,600£1,600£1,600 because the selling price of £12£12£12 exceeds the minimum average cost of £8£8£8.
The firm exhibits productive inefficiency and operates with an excess capacity of 250250250 units.
To achieve productive efficiency, the firm should expand production to 500500500 units, where average cost is £10£10£10.
