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Diagrammatically identify a monopolistic competitor that is incurring losses.

Diagrammatically identify a monopolistic competitor that is incurring losses.

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Answer #1

Consider the give problem the Monopolistic Competitive Market.

So, here “D” be the “perceived demand curve” and “MR” be the marginal revenue function corresponding to “D”. Now, “D1” be the actual demand curve, “MC=marginal cost” and “ATC=average total cost”, => “E” be the equilibrium where “MR=MC” and the optimum “Q” and “P” are given by “Q1” and “P1”. So, at the optimum output “ATC > P”, => the firm is making loss in the equilibrium.

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