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How do you graph a firm taking a loss under monopolistic competition?

Posted on April 16, 2014 at 7:55 PM

The cost curves of a monopolistically competitive firm look similar to a monopoly firm's curves. However, by definition monopolistic competition (many firms) is very different from a monopoly (one firm).

 

To graph a monopolistically competitive firm taking a short-run economic loss, the price must be less than the average total cost curve at the MR=MC level of output. Price must exceed the average variable cost curve.

 

In the long run, firms will exit the industry casuing the firm to break even.

 

In this No Bull Review video, you will learn how to graph a firm taking a short-run loss under monopolistic competition.

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AP Microeconomics Unit 2 Product Markets

Categories: AP Microeconomics, Micro Unit 2 Product Markets

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