Question

Costume jewelry is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that ___________

Answer 1

Answer: the producer will charge a price that is more than $3.

Step-by-step explanation:

Monopolistic competition is an industry characteristics whereby there are several firms that sell goods or services that can't be called perfect substitute but are identical.

Based on the above information, since marginal revenue and marginal cost equals $3, the producer will charge a price that is more than $3. This is necessary to cover up its cost.