Herrera Dawson
07/09/2023 · Primary School
Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss.
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To find the short-run profit-maximizing price and quantity for Fantastique Bikes, find where the marginal cost intersects the marginal revenue. The price is then found on the demand curve at this quantity. If the price is above the average total cost, the company is making a profit; if below, it's incurring a loss. Use the green rectangle to shade the profit or loss area.
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