Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

13. Monopolistic Competition

Monopolistic Competition Profit on the Graph

Microeconomics

13. Monopolistic Competition

Monopolistic Competition Profit on the Graph

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Multiple Choice

In the above figure, the monopolistically competitive firm earns an economic profit of:

Between $0 and $50 per day

Between $50 and $100 per day

More than $100 per day

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Verified step by step guidance

Identify the quantity where the firm maximizes its profit. This occurs where the marginal cost (MC) curve intersects the marginal revenue (MR) curve. From the graph, this intersection happens at a quantity of 40 units.

Determine the price at which the firm sells this quantity. To find this, go up vertically from the quantity of 40 units to the demand curve (D) and then horizontally to the price axis. The price is approximately $3 per unit.

Find the average total cost (ATC) at the profit-maximizing quantity. Go up vertically from the quantity of 40 units to the ATC curve and then horizontally to the price axis. The ATC is approximately $2 per unit.

Calculate the economic profit per unit by subtracting the ATC from the price: Economic Profit per Unit = Price - ATC = $3 - $2 = $1.

Calculate the total economic profit by multiplying the economic profit per unit by the quantity: Total Economic Profit = Economic Profit per Unit * Quantity = $1 * 40 = $40. This places the profit between $0 and $50 per day.