(Scenario: Monopolistically Competitive Firm) Use Scenario: Monopolistically Competitive Firm.Given the information in the scenario,what is the fixed cost for this firm? Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm,the demand curve is given by Q = 160 - P,and the firm's cost functions are: MC = 20 + 2Q and TC = 20Q + Q²+ 20.

A) There is none since this is the long run.
B) Fixed costs equal $160.
C) Fixed costs equal $20.
D) Fixed costs equal $180.

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Demetriana Pouncy · Accepted Answer

Final Answer : C, Explanation :  The fixed cost for this firm is the constant term in the total cost function, which is $20. This is because it does not vary with output and is a sunk cost that the firm must pay regardless of the level of production. Option A is incorrect since the concept of fixed cost only applies to the short run. Option B is also incorrect as it does not make sense for fixed costs to be equal to the highest price the firm can charge. Option D is incorrect because it adds the wrong terms together to arrive at a fixed cost.

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