Figure 10.18 -Refer to Figure 10.18.The Diagram Demonstrates That

Multiple Choice

Figure 10.18
-Refer to Figure 10.18.The diagram demonstrates that

A) in the short run, the monopolistic competitor produces an output Q_b, but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Q_a.
B) it is not possible for a monopolistic competitor to produce the productively efficient output level, Q_a, because of product differentiation.
C) it is possible for a monopolistic competitor to produce the productively efficient output level, Q_a, if it is willing to lower its price from P_b to P_a.
D) in the long run, the monopolistic competitor produces the minimum-cost output level, Q_a, but in the short run its output of Q_b is not cost minimising.