Assume a monopolistically competitive firm faces the following situation: P $20, output 13,000 units, MC 16 ATC $22, AVC = $15, and MR = $16 which statement BEST describes the firm's situation?
1. The firm would maximize its profits by decreasing its output
2. The firm is earning a normal profit, indicating that the market is in a long-run equilibrium
3. The firm would minimize its losses by increasing its output
4. The firm is minimizing its losses.
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