True or False: This indicates that there is a markup on marginal cost in the market for bats.- ○ True- ○ FalseMonopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the __________ externality implies that there is too much entry of new firms in the market. Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve.**Instructions:**- Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm.- Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.**Graph Explanation:**The graph includes the following:- **Demand Curve:** Downward sloping, indicating the relationship between price and quantity demanded.- **Marginal Revenue (MR) Curve:** Below the demand curve, representing the additional revenue from selling one more unit.- **Marginal Cost (MC) Curve:** U-shaped, showing the cost of producing one more unit.- **Average Total Cost (ATC) Curve:** U-shaped and above the MC curve, showing the average cost per unit at different output levels.**Symbols:**- **Mon Comp Outcome (Black Plus):** Indicates the long-run equilibrium price and quantity for the firm.- **Min Unit Cost (Grey Star):** Indicates the minimum average total cost and the associated quantity.**Analysis:**Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that (plus symbol) at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is (blank) the efficient scale.

Suppose that a firm produces baseball bats in a monopolistically competitive market. The following…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

True or False: This indicates that there is a markup on marginal cost in the market for bats.

- ○ True
- ○ False

Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the __________ externality implies that there is too much entry of new firms in the market.

Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve.

**Instructions:**

- Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm.
- Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.

**Graph Explanation:**

The graph includes the following:

- **Demand Curve:** Downward sloping, indicating the relationship between price and quantity demanded.
- **Marginal Revenue (MR) Curve:** Below the demand curve, representing the additional revenue from selling one more unit.
- **Marginal Cost (MC) Curve:** U-shaped, showing the cost of producing one more unit.
- **Average Total Cost (ATC) Curve:** U-shaped and above the MC curve, showing the average cost per unit at different output levels.

**Symbols:**

- **Mon Comp Outcome (Black Plus):** Indicates the long-run equilibrium price and quantity for the firm.
- **Min Unit Cost (Grey Star):** Indicates the minimum average total cost and the associated quantity.

**Analysis:**

Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that (plus symbol) at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is (blank) the efficient scale.

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