Final answer:
In a monopolistically competitive market given by P=100-Q, MR=100-2Q, and MC=70, the firm sets output where MR=MC to find Q=15, and then uses the demand curve to find the price, resulting in a market price of $85.
Step-by-step explanation:
To determine the price charged in a monopolistically competitive market, we apply the economic principle where the monopolist sets the output level such that marginal revenue (MR) equals marginal cost (MC) and then charges the price at this output level based on the demand curve (P = 100 - Q).
Given the equations, MR = 100 - 2Q and MC = 70, we set MR equal to MC to find the profit-maximizing output level:
- MR = MC
- 100 - 2Q = 70
- 2Q = 30
- Q = 15
Next, we use the demand curve to find the price that corresponds to the quantity Q = 15.
- P = 100 - Q
- P = 100 - 15
- P = 85
Therefore, the price charged in the market will be $85.
If the price were to be above the ATC, which is given as ATC = 70, the firm would be profiting at this level since price exceeds average total cost.