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Draw firm demand-marginal revenue-marginal cost

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Consider a firm that operates in monopolistic competition. This firm is currently in short- run equilibrium and is maximizing its profit. Price is equal to $30 and its total revenue is equal to $300. Average fixed cost is equal to $5 and total cost is equal to $200.

a. In a graph below, draw the firm's demand, marginal revenue, marginal cost, average variable cost, and average total cost curves. Also shade in the firm's total profit/loss. Assume that all cost curves have the usual U-shapes and make sure they are all consistent with the data above and with each other. Be precise and label each curve clearly.

b. What do you expect will happen to the firm's output in the long run (will it increase, decrease, stay the same)? Explain clearly.

Reference no: EM132482771

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