Monopolistic competition

The diagram below shows a firm operating under conditions of monopolistic competition in the long run.

Monopolistic competition in the long run

Which of the following statements is correct?

At the profit-maximising output $Q_1$ , the firm is operating in the price-inelastic range of its demand curve.

The firm is productively efficient because it operates at the point where Average Cost ( $A C$ ) is tangent to the Average Revenue ( $A R$ ) curve.

The firm makes only normal profits because at the profit-maximising output $Q_1$ , Average Revenue is equal to Average Cost ( $A R = A C$ ).

The firm is allocatively efficient because it produces where Price equals Marginal Cost ( $P = M C$ ).

Monopolistic competition Questions

The diagram below shows a firm operating under conditions of monopolistic competition in the long run.

Monopolistic competition in the long run

Which of the following statements is correct?

At the profit-maximising output $Q_1$ , the firm is operating in the price-inelastic range of its demand curve.

The firm is productively efficient because it operates at the point where Average Cost ( $A C$ ) is tangent to the Average Revenue ( $A R$ ) curve.

The firm makes only normal profits because at the profit-maximising output $Q_1$ , Average Revenue is equal to Average Cost ( $A R = A C$ ).

The firm is allocatively efficient because it produces where Price equals Marginal Cost ( $P = M C$ ).