Figure 107 Figure 10

Multiple Choice

Figure 10.7 Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 10.7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

A) The firm should exit the industry because its price is less than its average total cost.
B) The firm should minimise its losses by producing Q_y units and charging a price of P₀.
C) The firm should minimise its losses by producing Q_y units and charging a price of P₂.
D) The firm should minimise its losses by producing Q_y units and charging a price of P₁.