Is monopolistic competition efficient? Suppose that a firm produces polo shirts 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. 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 Mon Comp Outcome 70 Min Unit Cost 50 TC LU 40 20 MR Demand 0 10 20 30 40 50 60 70 100 QUANTITY (Thousands of shirts) True or False: This indicates that there is a markup on marginal cost in the market for shirts. True False
