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1. MONOPOLISTIC COMPETITION onsider the following graph of a monopolistically competitive firm: ↑ Price MC 50- 45- 40 35+ 282822" 25 20 15 10- st MR 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)? d. Is this firm operating with an excess capacity in the short run? Why? When the firm transitions to the long run equilibrium, will it be operating with an excess capacity or not? Explain.

1. MONOPOLISTIC COMPETITION onsider the following graph of a monopolistically competitive firm: ↑ Price MC 50- 45- 40 35+ 282822" 25 20 15 10- st MR 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)? d. Is this firm operating with an excess capacity in the short run? Why? When the firm transitions to the long run equilibrium, will it be operating with an excess capacity or not? Explain.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. MONOPOLISTIC COMPETITION Consider the following graph of a monopolistically competitive firm: 50 45 ↑Price 40 35+ 30 25 20 15 10 s+ MC ATC MR 10 20 30 40 50 60 70 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)? d. Is this firm operating with an excess capacity in the short run? Why? When the firm transitions to the long run equilibrium, will it be operating with an excess capacity or not? Explain.
Transcribed Image Text:1. MONOPOLISTIC COMPETITION Consider the following graph of a monopolistically competitive firm: 50 45 ↑Price 40 35+ 30 25 20 15 10 s+ MC ATC MR 10 20 30 40 50 60 70 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)? d. Is this firm operating with an excess capacity in the short run? Why? When the firm transitions to the long run equilibrium, will it be operating with an excess capacity or not? Explain.
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