AP MICRO You will draw the graph of a firm operating in a monopolistic competitive market structure. ** Be very careful when drawing your ATC curve – especially the long-run ** In the sort-run, –

AP MICRO

You will draw the graph of a firm operating in a monopolistic competitive market structure.  ** Be very careful when drawing your ATC curve – especially the long-run **

In the sort-run,

– The firm’s profit maximizing quantity is 1000 units.

– When Q = 1000, Price = $10.00, ATC = $6.00 and MC = $4.00.

– Is the firm generating an economic profit/loss? __________ How much? __________

Because the firm is generating economic profits/losses in the short-run, the firm’s demand and marginal revenue curves will shift.

In the long-run,

The firm’s new profit maximizing quantity and price are 800 units and $8.00.

In the same graph, draw the new demand and marginal revenue curves

In the long-run, is the firm generating an economic profit/loss? __________ Why? ___________

In the long-run, is the firm producing the efficient social quantity? __________ Why? __________