In a monopolistically competitive market, as new firms continue to enter, the demand that a typical firm faces continues to shift. It will stop when the demand (price) is equal to its This means a typical firm earns economic profits in the long run. a. Average cost; positive b. Marginal cost; zero c. Average cost; zero d. Average variable cost; zero
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- The graph shows the demand curve, marginal revenue curve, and marginal cost curve of Java Time, Inc., a producer of espresso machines in monopolistic competition. Draw a point at the firm's the profit-maximizing price and quantity. Label it 1. Draw an arrow that shows Java Time's markup. Draw the average total cost curve such that Java Time does not have excess capacity. Label it. Draw a point at the intersection of the ATC curve and the MC curve. Label it 2. Java Time's markup is $a machine. 240 220- 200- 180- 160- 140 120- 100- 80- 60- 40- 20- 04 0 Price and cost (dollars per machine) MC 100 200 300 400 Quantity (espresso machines per week) D MR 500Please dont copy and paste the answers One of your former peers starts up a firm after graduating NYUAD. However, he didn’t take Markets so is unsure if he is behaving optimally. He’s asked you for help. His firm faces monopolistic competition, has diminishing returns to its inputs and uses a fixed input. He is producing at a quantity such that P=MC, and he makes a positive profit. a. Draw the Demand curve, MR, MC, and ATC reflecting this situation on a graph. Label the quantity, price and profit of the firm under his strategy. b. Is his strategy maximizing his profits? Explain how he would do so if not. Label the quantity, price and profit of the firm under the optimal strategy on your graph in part a. c. He asks you about what you predict might happen to his profits in the future. What do you expect will happen to profits in this industry as we go to long run and why? What is the key assumption of monopolistic competition that gives you your conclusion?Price, cost, revenue $100 $90 $80 $70 $60 $50 0 000 MR MC D /AC 0 7000 14000 21000 12000 Dresses per year Refer to the graph shown of a monopolistically competitive firm. In the long run: marginal cost will fall for firms that remain as other firms exit the industry. demand will fall for firms that remain as other firms enter the industry. Odemand will rise for firms that remain as other firms exit the industry. O average total cost will rise for firms that remain as other firms enter the industry.
- The monopolistically competitive firm represented in the graph is in: $ $11.40 $10.20 $7.50 0 520 630 MC ATC MR Firm's Demand Quantity Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a long-run equilibrium since it is earning zero profit. b short-run equilibrium since it is earning zero profit. C short-run equilibrium, but not long-run equilibrium since it is earning positive economic profit. d long-run equilibrium, but not short-run equilibrium since it is earning positive economic profit. Your answerDue to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost? OA. Both marginal revenue and marginal cost will increase. OB. Marginal revenue will increase but marginal cost will decrease. OC. Marginal revenue will increase but marginal cost will not change. OD. Both marginal revenue and marginal cost will not be affected. OE Marginal revenue will not change but marginal cost will increase.$100 $90 MC АТС $80 $70 $60 $50 $40 $30 Demand = P $20 $10 MR $0 10 20 30 40 50 60 Output (Q) The firm shown in the diagram above is in long run equilibrium in a monopolistically competitive market. According to the graph, the Markup is Select one: а. $50 O b. $30 O c. $40 O d. $60
- A monopolistically competitive firm in a long-run equilibrium will likely produce which of the following? A. a technically efficient amount of outputB. less than a technically efficient amount of output and less than an allocatively efficient amount of outputC. more than a technically efficient amount of output but less than an allocatively efficient amount of outputD. an allocatively efficient amount of production.E. less than a technically efficient amount of output and more than an allocatively efficientFigure 16-9 The figure is drawn for a monopolistically-competitive firm. ↑Price MC 140 ATC 123.33 Demand. 90 56.67 MR. 100 133.33 Quantity Refer to Figure 16-9. Efficient scale is reached Oa. at 100 units. Ob. between 100 and 133.33 units. OC. at 133.33 units. Od. beyond 133.33 units.Give two characteristics of the following:a. a perfectly competitive marketb. a monopolistic market
- For each of the following characteristics, saywhether it describes a perfectly competitive firm, amonopolistically competitive firm, both, or neither.a. sells a product differentiated from that of itscompetitorsb. has marginal revenue less than pricec. earns economic profit in the long rund. produces at the minimum of average total cost inthe long rune. equates marginal revenue and marginal costf. charges a price above marginal cost4. Maria manages a bakery that specializes in ciabatta bread (monopolistically competitive firm), and she has the following information on the bakery’s demand and costs: Ciabatta Bread Sold per Hour (Q) 0 1 2 3 4 5 6 7 8 Price (P) $6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 Total Cost (TC) $3.00 7.00 10.00 12.50 14.50 16.00 17.00 18.50 21.00 a. To maximize profit, how many loaves of ciabatta bread should Maria sell per hour, what price should she charge, and how much profit will she make? b. What is the marginal revenue Maria receives from selling the profit-maximizing quantity of ciabatta bread? What is the marginal cost of producing the profit- maximizing quantity of ciabatta bread?The folowing diagram shows the curves for perceived demand, marginal revenue, and cost for Manuela's Pizza, which serves Mexican-style pizza. Manuela's is one of many other fast food restaurants in this town. MC Price and Cost ATC Demand Quantity of piezas Which statement describes the transibon to the long nun? Select the best answer. O More fast food restaurants will enter the market, and Manuela's demand curve will become more elastic. Manuela's will raise its prices since there is a large demand for its pizzas. O More fast food restaurants will enter the market, and Manuela's demand curve will become more inelastic. Manuela's will experience lower costs of production because it will expand its output.