PRICE PER UNIT (Dollars) 500 450 400 350 300 250 200+ LRAC 150 100 50 + MC o ° 50 100 150 MR Demand 200 250 300 350 400 450 500 QUANTITY (Units) True or False: The long-run equilibrium price is $235 per unit. True False True or False: The long-run equilibrium quantity is 185 units. True False True or False: The LRAC curve is at its minimum at a quantity of 100 units. True False Monopolistically Competitive Outcome Minimum of the LRAC True or False: The long-run equilibrium price is less than the marginal cost of producing the equilibrium output. True False

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, if we assume that the firm chooses the level of output that maximizes profit, what is total revenue at that output level? Price (P) 36 32 MC1 28 24 ATC 20 Dr AVC1 16 12 4 2 4 6 8 10 12 14 16 18 Quantity (Q) Select one: a. $264 b. $200 c. $220 d. $240

Demand Schedule Assume MC = 0 Price Quantity $24 0 $22 1 $20 2 $18 3 $16 4 $14 5 $12 6 $10 7 $8 8 $6 9 $4 10 $2 11 $0 12   1. If the market is perfectly competitive, what will the market equilibrium price and quantity be in the long-term?  Explain how you arrived at that answer. 2. If the market is a duopoly and the firms collude to maximize joint profits, what will market price and quantity be?  Explain how you arrived at that answer. 3. If the market is a duopoly and the firms collude to maximize joint profits, what is each firm's total revenue if the firm split the market equally?  Explain how you calculated that answer.

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