Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss. PRICE (Dollars per bike) 500 450 400 350 300 250 200 100 50 MC 0 0 ATC MR Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bikes) Given the profit-maximizing choice of output and price, the shop is earning shops in the industry than in long-run equilibrium. Monopolistically Competitive Outcome Profit or Loss ? profit, which means there are Now consider the long run in which bike manufacturers are free to enter and exit the market. Using your results from above, show the possible effect of free entry and exit by shifting the demand curve for a typical individual producer of bikes on the following graph. PRICE (Dollars per bike) QUANTITY (Bikes) Demand Demand Which of the following statements are true about both monopolistic competition and monopoly? Check all that apply. Price is above marginal cost. Firms can earn positive profit in the long run. Firms are not price takers. Firms earn zero profit in the long run.
Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss. PRICE (Dollars per bike) 500 450 400 350 300 250 200 100 50 MC 0 0 ATC MR Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bikes) Given the profit-maximizing choice of output and price, the shop is earning shops in the industry than in long-run equilibrium. Monopolistically Competitive Outcome Profit or Loss ? profit, which means there are Now consider the long run in which bike manufacturers are free to enter and exit the market. Using your results from above, show the possible effect of free entry and exit by shifting the demand curve for a typical individual producer of bikes on the following graph. PRICE (Dollars per bike) QUANTITY (Bikes) Demand Demand Which of the following statements are true about both monopolistic competition and monopoly? Check all that apply. Price is above marginal cost. Firms can earn positive profit in the long run. Firms are not price takers. Firms earn zero profit in the long run.
Chapter9: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 5SQ
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Transcribed Image Text:Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand
curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive
company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss.
PRICE (Dollars per bike)
500
450
400
350
300
250
200
100
50
MC
0
0
ATC
MR
Demand
50 100 150 200 250 300 350 400 450 500
QUANTITY (Bikes)
Given the profit-maximizing choice of output and price, the shop is earning
shops in the industry than in long-run equilibrium.
Monopolistically Competitive Outcome
Profit or Loss
?
profit, which means there are
Now consider the long run in which bike manufacturers are free to enter and exit the market.
Using your results from above, show the possible effect of free entry and exit by shifting the demand curve for a typical individual producer of bikes on
the following graph.
PRICE (Dollars per bike)
QUANTITY (Bikes)
Demand
Demand
Which of the following statements are true about both monopolistic competition and monopoly? Check all that apply.
Price is above marginal cost.
Firms can earn positive profit in the long run.
Firms are not price takers.
Firms earn zero profit in the long run.
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