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- If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?Aside from advertising, how can monopolistically competitive films increase demand for their products?Suppose you operate in a monopoly environment and you set your price inorder to achieve maximum pro ts. Is your demand elastic, unitary elastic, or inelastic? Does your answer change if you were in a monopolistically competitive market? What happens to the elasticity when you go from a monopolistic market to a monopolistically competitive one? Explain and give an example. Retailer companies sell many products for which manufacturers have a sug-gested retail price printed on the package. Is there an economic reason for this price? If you are the manager of a retailing outlet, what factors will determine whether you should charge the suggested retail price or some higher or lower price?
- 2. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…Compare the elasticity of the monopolistic competitor’s demand with that of a pure competitor and a pure monopolist. Assuming identical long-run costs, compare graphically the prices and outputs that would result in the long run under pure competition and under monopolistic competition. Contrast the two market structures in terms of productive and allocative effifi ciency. Explain: “Monopolistically competitive industries are characterized by too many firms, each of which produces too little.”uestlon 4 Of 16 A monopolistic competitor wishing to maximize profit will select a quantity where marginal cost equals demand. marginal cost equals average cost. marginal revenue equals average cost. O marginal revenue equals marginal cost. If a firm is producing a quantity where marginal revenue exceeds marginal costs, the firm should existing levels of production in order to expand ; decrease total costs O expand ; increase profitability decrease ; increase total revenue decrease ; increase profitability If a firm is producing a quantity where marginal cost exceeds marginal revenue, the firm should existing levels of production in order to decrease ; increase profitability expand ; decrease total costs O expand ; increase profitability decrease ; increase total revenue
- Table 15-18Tommy’s Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy’s is able to engage in perfect price discrimination. COSTS REVENUES QuantityProduced Total Cost MarginalCost QuantityDemanded Price TotalRevenue MarginalRevenue 0 $100 -- 0 $170 -- 1 $140 1 $160 2 $184 2 $150 3 $230 3 $140 4 $280 4 $130 5 $335 5 $120 6 $395 6 $110 7 $475 7 $100 8 $575 8 $95 Refer to Table 15-18. If the monopolist can engage in perfect price discrimination, what is the quantity that maximizes economic profit? Group of answer choices 5 ties 6 ties 7 ties 8 ties1. A monopolistic producer of two goods, G1 and G2, has a total cost function TC = 5Q1 + 10Q2 where Q1 and Q2 denote the quantities of G1 and G2 respectively. If P1 and P2 denote the corresponding prices then the demand equations are P1 = 50 − Q1 − Q2 P2 = 100 − Q1 − 4Q2Find the maximum profit if the firm’s total costs are fixed at Gh100. Estimate the new optimal profit if total costs rise to Gh101.are 13-7 sis and evenue $4 P2 MC FM/ ATC E OG AS SS AVC (oo) ubonq aviimoo loiteiloqo sol o bnal Po Demand MA Quantity ure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. 3) Refer to Figure 13-7. Which of the following statements describes the best course of action for the firm depicted in the diagram? * A) The firm should minimize its losses by producing Qy units and charging a price of P1. B) The firm should minimize its losses by producing Qy units and charging a price of P2. C) The firm should minimize its losses by producing Qy units and charging a price of Po. D) The firm should exit the industry because its price is less than its average total cost. 3) A 4) Refer to Figure 13-7. Which of the following is the area that represents the profit or loss experienced by the firm? A) A loss represented by the rectangle PivwPo. B) An accounting profit equal to P1vwPo. C)A loss represented by the rectangle P2uvP1. D) A loss…
- Study Tools ins ess Tips ss Tips PRICE (Dellars per engine) 288 RSS #RR 100 50 30 20 10 MO 0 0 10 ATC MR Demand 20 30 40 50 70 DO 90 QUANTITY (Thousands of engines) 100 Mon Comp Outcome Min Unt Cost Decause this market is a monopolistically competitive market, you can tell that it is in long-run equilibrum by the fact that optimal quantity. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is average total cost. at the the minimumDirections: Analyze and answer the questionsCompetitive PricingFirms need to take care when responding to competitor’s action with a pricing change,as this could trigger a potential price war. Therefore, in this activity you need to identifywhat would be the most appropriate pricing reaction for the following generic situationsactions.1. To communicate the high quality of your product against a new competitor2. The market that the firm operates in is deregulated (allowing more competitorsto enter)3. A new substitute product/industry emerges4. A major increase in production costs occurs5. The firm is looking to benefit from economies of scale6. When you know that key competitors will always match your price changes7. To increase market share significantly8. For one of the firm’s brands/products that has increased its brand equity9. When the firm’s product is experiencing high seasonal demand10.When a major competitor leaves the marketQUESTIONS1. For each of the above situations,…1. Given the demand function Q = 500 − 3P − 2PA + 0.01Y where P = 20, PA = 30 and Y = 5000, find (a) the price elasticity of demand (b) the cross-price elasticity of demand (c) the income elasticity of demand.If income rises by 5%, calculate the corresponding percentage change in demand. Is the good inferior or superior? (d) A monopolistic producer of two goods, G1 and G2, has a total cost function TC = 5Q1 + 10Q2 where Q1 and Q2 denote the quantities of G1 and G2 respectively. If P1 and P2 denote the corresponding prices then the demand equations are P1 = 50 − Q1 − Q2 P2 = 100 − Q1 − 4Q2Find the maximum profit if the firm’s total costs are fixed at Gh100. Estimate the new optimal profit if total costs rise to Gh101.
