4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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 longrun monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the rm faces and the quantity associated with that cost. PRICE (Dollars per razor) 100 90 80 70 60 50 40 30 20 10 20 30 40 50 60 70 QUANTITY (Thousands of razors) 80 90 100 Mon Comp Outcome )3! Min Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that P = ATC V at the optimal quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is V the efficient scale. True or False: This indicates that there is excess capacity in the market for razors. equal to greater than 0 True False Monopolistically competitive markets may be socially inefficient clue to the presence of too many or too few firms. The presence of the business-stealing V externality implies that there is too much entry of new firms in the market