Draw a Graph!!! Consider the monopolistic competition model (with the CC and PP curves). Suppose: a. S = 100 b. b = 1 c. c = 2 d. F = 10 Solve for the equilibrium number of firms n and the price, P. Now suppose c falls to 1. Solve for the new number of firms, n, and the new price, P. Tell a story for what happens.
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curves). Suppose:
a. S = 100
b. b = 1
c. c = 2
d. F = 10
Solve for the equilibrium number of firms n and the price, P.
Now suppose c falls to 1. Solve for the new number of firms, n, and the new price, P.
Tell a story for what happens.
Step by step
Solved in 3 steps with 4 images
- a. b. C. d. Price panel a panel b panel c panel di Price (a) (c) MA MC MR ATC Quantity MC ATC D Quantity Price Price (b) MR (d) MC Quantity MC مما ATC Refer to Figure 3. Assume a monopolistic competitive environment: From the 4 graphs depicted, which one of them represents a short-run equilibrium that encourages the entry of other firms? ATC Quantity DThe graph below shows the demand curve for a perfectly competitive firm. Suppose that firms in this industry discover a way to differentiate their products. Using the line drawing tool, show how the firm's demand curve would be likely to change. Label the new demand curve 'd,'. Carefully follow the instructions above, and only draw the required objects. Since the demand curve is downward sloping, the monopolistically competitive firm will set a price OA. that is less than marginal cost. B. that is unrelated to marginal cost. OC. that is equal to marginal cost. D. that is greater than marginal cost. Price 10- Q Q Output 10Which of the following is true regarding monopolistic competition? Ⓒa. Each firm behaves as a monopolist, but makes no profits in the long run due to competition from close substitutes b. Save your money, and only purchase the railroads and high-end properties on the board (i.e. red, yellow, green, and blue) c. There is no such thing as monopolistic competition, it is an oxymoron d. Firms behave competitively, but they make profits in the long run because there are some barriers preventing entrepreneurs from entering the market
- The graph below is for Chic and Sharpe Ltd., a firm in the women’s garment industry, which is monopolistically competitive. a. Label the four curves in the graph above. Double-click on each of the question marks on the graph and select the correct label. b. What is the profit-maximizing output and price? Output: units Price: $ c. At the output in (b), what are the amounts of Total cost: $ ; Total revenue: $ Economic profit: $ d. How much excess capacity exists? units e. What will the presence of economic profits do? i) Result in the entry of new firms into the industry ii) Have no effect on the number of firms in the industry iii) Result in the exit of firms from the industry f. As a result of your answer to (e), the demand curve in the above graph will i) shift to the right ii) shift to the left iii) not shiftHow is monopolistic competition like monopoly, perfect competition and oligopoly? Give two examples of price discrimination. In each case, explain why the monopolist chooses to follow this business strategy Why does price equal marginal revenue for the perfectly competitive firm? What is the relationship to the demand curve for the firm?What is the relationship between product differentiation and monopolistic competition? Or is there a relationship. Why?
- II. The figure is drawn for a monopolistically competitive firm. PRICE 140 123.33 90 56.67 100 133.33 QUANTITY MC ATC Demand MR Refer to the figure above and explain: A). In order to maximize its profit, how many units the firm will choose to produce? 100 B). When the firm is maximizing its profit, the markup over marginal cost amounts to 50 C). The firm's maximum profit is D). Efficient scale is reached beyond which level of units? 133.33Exercise A.8. The graph below corresponds to a company operating in a market under conditions of monopolistic competition: € 5 4 3 2 1 CM CMe 20 40 60 90 100 120 Quantity of output a) What is the level of production maximizes the short-term profits of this company? b) What price will the company charge to maximize its profits? c) What benefits does the company obtain in the short term? d) How would advertising affect the curves shown in the graph? Would profits necessarily increase? Reason your answers.The graph shows the demand curve, marginal revenue curve, and cost curves of Bob's Best Burgers, a firm in monopolistic competition. Draw an arrow at the profit-maximizing quantity to show the firm's markup. Because firms (of which Bob's is one) are expect firms to the burger market. we would ⒸA. breaking even; enter OB. incurring an economic loss; increase demand in ⒸC. making an economic profit; enter OD. incurring an economic loss; exit 6.50 5.00- 4.50- 4.00- 3.00 Price and cost (dollars per burr 2.50 MC 50 ATC D MR 100 150 Quantity burgers per day) >>> Draw only the objects specified in the question. ✔ 250 800
- What gives firms market power in an industry characterized by Monopolistic Competition?K Suppose the figure to the right represents the market for a particular brand of shampoo, such as L'Oreal, Lancome, or Maybelline. Assume the market is monopolistically competitive. What is the firm's profit-maximizing price and quantity? thousand per bottle. (Enter your The monopolistically competitive firm's profit-maximizing quantity is bottles of shampoo, and its profit-maximizing price is $ responses as integers.) Price and cost (per bottle) ♫ 3.00- MC 2.80- ATC 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ 0 MR 2 4 6 8 10 12 14 16 18 20 22 24 Quantity (shampoo bottles in thousands)Exercise A.13. Explain and graph the long-run equilibrium of a monopolistic firm and that of a perfectly competitive firm. Compare both situations in terms of the level of production, prices and economic efficiency.