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a) Can the threat of a
actions might a firm take to make this threat credible?
b)Why is the firm’s demand curve flatter than the total market demand curve in
making a profit in the short run. What will happen to its demand curve in the long
run?
Monopolistic competition refers to a market structure characterized by many firms producing differentiated products that are close substitutes for each other. In this market structure, firms have some degree of market power, which allows them to charge prices higher than in a perfectly competitive market, but not as high as in a monopoly.
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- The diagram above represents a monopolistically competitive firm. Answer the questions below. Is this firm operating in the short-run or long-run? How do you know? Calculate this firm’s accounting profit. From the diagram, what is the productively efficient output for this firm? From the diagram, economies of scale are maximized at which output level? Explain. From the diagram, what is the allocatively efficient output for this firm? Explain.In the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a graphPRICE (Dollars per shirt) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 ATC True Demand MR + 20 30 40 50 60 70 80 QUANTITY (Thousands of shirts) O False 90 100 + 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. Furthermore, the quantity the firm produces in long-run equilibrium is average total cost. at the the quantity at which firms minimize True or False: In long-run equilibrium, a monopolistically competitive firm charges a price that is above marginal cost.
- In long run equilibrium, economic profits tend to zero in a perfectly competitive market and also in a monopolistically competitive market. This is true because both market structures share a crucial characteristic. What is the characteristic that causes economic profits to get pushed towards zero in both perfect competition and monopolistic competition?Suppose that a firm produces polo shirts 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 shirt) 0 10 20 True O False MR Demand 60 QUANTITY (Thousands of shirts) ATC 40 BO 190 100 Mon Comp Outcorne 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 there is a markup on marginal cost in the market for shirts. at the the efficient scale.Suppose that a firm produces polo shirts 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.
- 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 CostWhat are the “monopolistic” and the “competitive” elements of monopolistic competition?Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a monopoly, a monopolistic competitor: can restrict output to increase price (at least in the short run).checked can make profits or losses in the short run.unanswered faces a downward-sloping demand curve.unanswered faces high barriers to entry.unanswered makes economic profits in the long run.unanswered produces where P > MR = MC.unanswered has one seller.unanswered Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a perfect competitor, a monopolistic competitor: faces a perfectly elastic demand…Answer the question: Aside from advertising, how can monopolistically competitive firms increase demand for their products? What effect would doing this have on the elasticity of the firm’s perceived demand curve? Explain your answers.
- The diagram above shows a monopolistically competitive firm in the long run. Answer the questions below. If the firm is currently producing and selling Q1 units, what is the price being charged? Using the points displayed on the diagram, name the rectangular area that represents the total fixed cost of production. Using the points displayed on the diagram, name the rectangular area that represents the total variable cost of production. ) Using the points displayed on the diagram, name the rectangular area that represents the profit or loss. What should the firm do regarding price and/or quantity to minimize its losses?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. 100 90 80 Mon Comp Outcome 70 Min Unit Cost 50 ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bats) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that ▼ at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is the efficient scale. PRICE (Dollars per bat)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. 100 90 Mon Comp Outcome 80 70 60 Min Unit Cost 50 ATC 40 30 20 MC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of engines) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that at the optimal quantity for each firm. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is the minimum average total cost. PRICE (Dollars per engine) 10