Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
Figure: Profit Maximization in Monopolistic Competition
-(Figure: Profit Maximization in Monopolistic Competition) In panel (B) of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price is P₂ and the ATC curve is tangent to the new demand curve. The portion of the ATC that lies to the right of the tangency and continues down to the intersection of MC with ATC indicates:

A) that the firm is incurring an economic loss.
B) that the firm is earning an economic profit.
C) overutilization.
D) excess capacity.