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Give reason for the following statement
1)Demand curve facing a
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- 2. Entry or exit 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. 500 450 Monopolistically Competitive Outcome 400 350 300 Profit or Loss A ATC 250 200 150 MC 100 50 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 profit, which means there are shops in the industry than in long-run equilibrium. PRICE (Dollars per bike)#3) Draw a diagram of the long run equilibrium in a monopolistically competitive market. How is price related to average total cost? How is price related to marginal cost?7) Although the long run equilibrium of a monopolistically competitive markets involves zero economic profit like perfect competition, the outcome is deemed to be inefficient. Why is that the case? Are there desirable characteristics of monopolistic competition that potentially balance some of the inefficiencies?
- 3. Discuss the long debate of economists whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive2. The demand curve facing a competitive firm The following graph shows the daily market for extra-large cardboard boxes in San Francisco. Suppose that Vesoro is one of more than a hundred competitive firms in San Francisco that produce such cardboard boxes. Based on the preceding graph showing the daily market demand and supply curves, the price Vesoro must take as given is . Fill in the price and the total, marginal, and average revenue Vesoro earns when it produces 0, 1, 2, or 3 boxes each day. Quantity Price Total Revenue Marginal Revenue Average Revenue (Boxes) (Dollars per box) (Dollars) (Dollars) (Dollars per box) 0 0 – 1 2 3 The demand curve that Vesoro faces is identical to which of its other curves? Check all that apply. Average revenue curve Marginal revenue curve Supply curve Marginal cost curve4. Is monopolistic competition efficient? Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dollars per bat) 100 90 80 70 60 8 50 40 30 20 10 0 MC 0 10 ATC O True MR False Demand 20 30 40 50 60 70 QUANTITY (Thousands of bats) 80 90 100 Mon Comp Outcome Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is Min Unit Cost True or False: This indicates that…
- 37 - At what point should the monopolistic firm produce in order to maximize its profit in the short run? a) MR=AVC B) MC=MR C) MC=AVC D) MR=AC TO) MC=AC2. The demand curve facing a competitive firm The following graph shows the daily market for large cardboard boxes in San Francisco. 0123456789104036322824201612840PRICE (Dollars per large box)QUANTITY (Millions of large boxes)DemandSupply Suppose that Talero is one of more than a hundred competitive firms in San Francisco that produce such cardboard boxes. Based on the preceding graph showing the daily market demand and supply curves, the price Talero must take as given is . Fill in the price and the total, marginal, and average revenue Talero earns when it produces 0, 1, 2, or 3 boxes each day. Quantity Price Total Revenue Marginal Revenue Average Revenue (Boxes) (Dollars per box) (Dollars) (Dollars) (Dollars per box) 0 0 – 1 2 3 The demand curve that Talero faces is identical to which of its other curves? Check all that apply. Marginal revenue…4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. → Show Transcribed Text 100 90 80 70 8 PRICE (Dollars per kit) 50 40 30 20 10 0 0 MC 10 ATC 3 c MR 20 30 40 50 60 70 80 QUANTITY (Thousands of kits) Demand 90 100 Mon Comp Outcome Min Unit Cost
- 4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. (?) PRICE (Dollars per kit) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 20 ATC MR Demand 30 40 50 60 70 QUANTITY (Thousands of kits) 80 90 100 + Mon Comp Outcome Min Unit Cost3. Is monopolistic competition efficient? Suppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dollars per engine) 100 90 80 70 60 50 40 30 20 10 0 0 MC ATC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of engines) + Mon Comp Outcome Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity for each firm. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is minimum…4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. ? PRICE (Dollars per kit) 100 90 80 70 60 50 40 30 20 10 0 0 MC 10 True ATC False MR 20 30 40 50 60 70 QUANTITY (Thousands of kits) 80 Demand 90 100 Mon Comp Outcome Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that for each firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is cost. Min Unit Cost True or False: This…
