8 . Monopolistic Competition 1. Graphical Picture 2. Profit Max 3. Welfare Effects STEP: 3 of 3 The following graph shows Crest's demand curve, marginal-revenue (MR) curve, average-total-cost (ATC) curve, marginal-cost (MC) curve, and profit- maximizing output and price. Demand B Price, Cost, Revenue ATC MC MR Quantity of Crest ToothpasteIndicate which of the labeled areas represent consumer surplus derived from the purchase of Crest toothpaste or deadweight loss relative to the efficient level of output. A B C D Consumer Surplus O 0 0 0 Deadweight Loss O O O O Suppose the government required Crest to produce the efficient level of output. Which of the following describes what would happen to the firm and Crest's customers? O Crest would earn zero profit, and its customers would be just as well off as before. O Crest would earn positive profit and increase production, boosting consumer surplus. Crest would earn negative profit, forcing it to shut down, and Crest's customers would gain no consumer surplus