The diagram below shows the demand, revenue, and cost curves for a firm operating under monopolistic competition in long-run equilibrium.
Which of the following statements correctly identifies the profit and efficiency status of this firm?
The firm earns supernormal profit because price P1P_1P1 is greater than marginal cost at point ZZZ.
The firm is productively efficient because it operates at the point of tangency between ARARAR and ATCATCATC at point XXX.
The firm earns only normal profit at price P1P_1P1 and output Q1Q_1Q1, while failing to achieve either productive or allocative efficiency.
The firm achieves allocative efficiency at price P1P_1P1 because the demand curve (ARARAR) is tangent to the average total cost curve (ATCATCATC) at point XXX.
