Question

You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost:

P = MC, P> ATC

Which of the following statements is true about the firm? Check all that apply.

The firm can increase its profit by reducing its output.

The firm is in long-run equilibrium.

The firm is possibly maximizing profit.

Answer 1

The monopolistic firm produces at MR=MC to maximize profit but the firm is producing at MC=P so the firm can increase profit by reducing output.
The firm is not in long run because in long run P=ATC

option first