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4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for pickleball paddles. The following graph shows the demand curve,
4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for pickleball paddles. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. 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. 100 90 30 Mon Comp Outcome 70 60 Min Unit Cost PRICE (Dollars per paddle) ATC 20 10 MC MR. Demand 10 20 30 40 50 60 70 QUANTITY (Thousands of paddles) Because this market is monopolistically competitive, you can tell that it is in long run equilibrium by the fact that _ at the optimal quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is the efficient scale. True or False: This indicates that there is excess capacity in the market for paddles. True O False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the V externality implies that there is too much entry of new firms in the market
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