A monopolistically competitive firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can infer that

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08-08-2022
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A monopolistically competitive firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can infer that

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smecloudbird18 smecloudbird18 · Answer 1 · 2022-08-22T09:03:06+02:00

We can infer from the given information that the firm is currently maximizing its profit.

The firm is currently maximizing profit because the marginal revenue is equal to the marginal cost at $6.

This means that the last unit which is produced gives zero marginal profit and producing more units will cause a huge decrease in profit. The profit of the firm is positive.

Profit = (Price- Average total cost) * units produced

Profit = ($10-$6)*10

Profit= ($4)*10

Profit= 40$

The average total cost of the production is less than the price. It will not leave the market in the long run if the price is either greater or equal to the average total cost. The firm will not incurr any losses in the long run.

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