Question

Suppose a monopolistically competitive firm produces 20 units of output. at this level, atc = 70, p = 50, mr = 30, and mc = 30. the firm is experiencing a loss of:________

Answer 1

Based on the average total cost to the monopolistically competitive firm and the revenue, the loss they are expecting is -$400

How much losses are expected?

The losses that the monopolistically competitive firm would be the difference between their revenue from the 20 units and their average total cost.

Solving for the loss to the monopolistically competitive firm gives:

= (Average total cost - Price) x number of units

= (70 - 50) x 20

= -$400

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