Because the market depicted above is a monopolistically competitive market, it is easy to see that there is is a long run equilibrium situation because the price is equal to the Average Total Cost curve for each firm, where the quantity is optimal.
Monopolistic competition is a market system in which numerous enterprises exist in an industry and create similar but distinct products.
None of the firms has a monopoly, and each company acts independently of the actions of the others.
From the attached graph and the information given,
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Full Question:
Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that [P>ATC/ MR > MC/ P = ATC/ MR = MC] at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is [equal to/ greater than/ less than] the efficient scale.
True or False: This indicates that there is excess capacity in the market for jackets.
Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the [product variety/ business-stealing] externality implies that there is too little entry of new firms in the market.
