We know that monopolistically competitive firms prevent the efficient use of resources because at the monopolistically competitive equilibrium,Hint: "efficient" is measure relative to the perfectly competitive outcome. Question 10Answer a. MR > P. b. P > MC. c. P = MC. d. P > ATC.
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Hint: "efficient" is measure relative to the
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- Suppose the carwash market is monopolistically competitive and that businesses in this market are currently earning positive economic profits. In the long run, the demand for an individual car wash business will the market , which will cause economic profits to as more carwash businesses enter Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a fall; rise fall; fall to zero rise; fall to zero d rise; riseDraw a diagram to show the long-run equilibrium of a firm in a Monopolistically Competitive market clearly labeling the profit maximizing level of Q and P. Is P greater/less than ATC? Is P greater/less than MC? How much profit firm is earning in the long run? Also show the efficient level of outcome and explain why this firm does not produce at the efficient level.Exercise 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 following graph represents a monopolistically competitive firm in long-run equilibrium. Place the black point (cross sign) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Next, place the grey star on the graph to indicate the point where the LRAC reaches a minimum. PRICE PER UNIT (Dollars) 500 450 400 350 300 250 200 150 100 50 MC 0 0 50 LRAC MR Demand 100 150 200 250 300 350 400 450 500 QUANTITY (Units) Monopolistically Competitive Outcome Minimum of the LRAC The long-run equilibrium price is $ (Hint: Use the graph to find the numeric value of the price at equilibrium.) The long-run equilibrium quantity is units. The LRAC curve is at its minimum at a quantity of The long-run equilibrium price is units. the marginal cost of producing the equilibrium output. ?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.The market for peanut butter in Nutville is monopolistically competitive and in long-run equilibrium. One day, consumer advocate Jif Skippy discovers that all brands of peanut butter in Nutville are identical. Thereafter, the market becomes perfectly competitive and again reaches its long-run equilibrium. Using an appropriate diagram, explain whether each of the following variables increases, decreases, or stays the same for a typical firm in the market. Price Quantity Average total cost Marginal cost Profit please answer all 5 parts
- What are the most important differences between perfectly competitive markets and monopolistically competitive markets? Give two examples of products sold in perfectly competitive markets and two examples of products sold in monopolistically competitive markets.Westchesser Gloves is a monopolistically competitive firm that sells leather gloves. Use the graph to highlight the area of profit or loss and answer the questions, Price per pair (5) 10 20 Marginal profit or loss: $ Aver co Pairs of gloves (in thousand) Demand 70 80 90 100 Profit or loss Calculate Westchesser's profit or loss at the profit-maximizing price. What will happen to the number of firms in this industry in the long run? Firms will enter this industry, increasing the price at which each firm can sell their gloves until firms begin to earn normal profits. O Firms will exit this industry, increasing the price at which each firm can sell their gloves until firms begin to carn normal profits. O Firms will exit this industry, decreasing the price at which each firm can sell their gloves until firms begin to carn normal profits. O Firms will enter this industry, decreasing the price at which each firm can sell their gloves until firma begin to carn normal profits3. You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If not, what should it do to increase profit? If the firm is maximizing profit, is the market in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? a. P < MC, P > ATC b. P > MC, P < ATC c. P = MC, P > ATC d. P > MC, P = ATC
- Suppose that a company operates in the monopolistically competitive market for denim jackets. 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. Nex 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 jacket) 100 90 80 70 60 50 ATC 20 40 30 20 10 10 MC MR Demand 0 + + 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) Mon Comp Outcome Min Unit Cost at the optimal the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that P= ATC quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates…encient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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. 3; 100 50 90 80 88 + 70 70 60 550 40 PRICE (Dollars per razor) 30 30 10 MC 20 20 0 10 10 ATC +. ? Mon Comp Outcome MR Demand 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Min Unit CostThe following graph shows cost curves for a monopolistically competitive firm. Place the black point (cross symbol) on the graph to indicate the short-run profit-maximizing price and quantity for a monopolistically competitive firm. 500 450 PRICE PER UNIT (Dollars) 400 350 300 250 200 150 100 50 50 MC 0 0 50 100 150 LRAC MR Demand 200 250 300 350 400 450 500 QUANTITY (Units) + Monopolistically Competitive Outcome The following graph shows cost curves for a perfectly competitive firm. Place the grey point (star symbol) on the graph to indicate the point where a perfectly competitive firm would produce. ? 500 450 400 350 300 * Perfectly Competitive Outcome