ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- 3. Assume that a profit-maximizing firm in a monopolistically competitive industry is in long-run equilibrium. (a) Draw a correctly labeled graph that shows the profit-maximizing firm's price and output. (b) Assume that the city in which this industry operates eliminates the business license fee (a fixed cost) for all firms in this industry. How does the elimination of the license fee affect each of the following for the individual firm in the short run? Explain your answers. (i) Output (ii) Economic profitsarrow_forwardIf Amazon sells dozens of similar types of pencils at slightly different prices, we might assume the pencil market is _________. Select one: a. an oligopoly. b. a monopolistically competitive market. c. a monopoly. d. a perfectly competitive market.arrow_forward1. Suppose we live in a world where the widgets market is a monopolistically competitive market with homogenous firms (i.e. no productivity differences among firms). There are two countries: A and B. In each country, consumer demand for widgets can be written as Q = S x- x (P – P), 30 where n is the number of widget firms, P the price of widget charged by the firm, and P the average price of widget by other firms in the market. Moreover, widget firms in both countries have the same total cost function, which is C = 750 + (5 × Q). It is also given that marginal revenue of each 30Q firm can be written as MR = P – Total demand for widget in country A is SA = 900 and Sg = 1600 in country В. a) Derive the average cost function from the total cost function. What is the marginal cost? b) Calculate the number of firms and the prices of widget in each country when trade is not allowed (that is, calculate na, ng, Pa, PBÌ- c) Calculate the number of firms and the price of widget in the unified…arrow_forward
- 4. Study Questions and Problems #4 Consider this statement: "Because price equals long-run average cost and profits are zero, a monopolistically competitive firm is efficient." Do you agree or disagree? Agree, because a monopolistically competitive firm produces a socially optimal output. Disagree, because a monopolistically competitive firm does not produce enough output from a socially optimal point of view. Disagree, because a monopolistically competitive firm produces too much output from a socially optimal point of view.arrow_forward3. Demand for a good produced by a duopoly is given by P = 100 - Q. Both firms have constant marginal costs, MC = 20 and zero fixed costs. Firms can choose to maximize profit or revenue. Suppose firm 1 choose to maximise profit and firm 2 choose to maximise revenue. Determine the equilibrium price and quantity of each firm.arrow_forward(Figure: The Market for Designer Boots in Monopolistic Competition IV) Use Figure: The Market for Designer Boots in Monopolistic Competition. A positive economic profit will be earned if the profit-maximizing price is in panel Price, cost XXX G; (A) H; (B) (a) O I; (C) O F; (A) ATC Quantity (per period) Price, (b) cost ATC Quantity (per period) Price, (c) cost ATC Quantity (per period)arrow_forward
- i need the answer quicklyarrow_forward1. Briefly discuss the various ways monopolistically competitive firms can differentiate their products? 2. In the long-run, a perfectly competitive firm will earn what kind of economic profit?arrow_forward(12) Suppose all firms in a monopolistically competitive industry were merged into one large firm. Would that new firm produce as many different brands? Would it produce only a single brand? Explain.arrow_forward
- 7) How do Monopolistic Competition and Perfect Competition differ in terms of efficient use of resources, in the long run?arrow_forward3. 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 MC ATC MR 0 + Demand H 0 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, the quantity the firm produces in long-run equilibrium is True or False: This indicates…arrow_forwardMonopolistically competitive firms can earn above-normal economic profits in the short run. (a) In a few sentences, explain what will happen in the long run that will prevent monopolistically competitive firms from continuing to earn above-normal economic profits. (b) What is different about monopolists and oligopolists that allows these firms to earn above-normal economic profits in the long run, when perfectly competitive and monopolistically competitive firms cannot? Explain your answer in a few sentences.arrow_forward
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