a) At the profit maximizing output level, the firm's profit is: A) $1,200. B) $1,050. C) $750. D) $375. b) In the long-run we expect: A) more firms to enter the market. C) the average cost of production to decrease. D) the price of the good to increase. B) the firm's demand curve to shift to the right. c) At the profit maximizing output level, the is earning a A) positive economic profit and more firms are expected to enter the market. B) zero economic profit and no firms are expected to enter the market. C) negative economic profit and more firms are expected to leave the market. D) There is not sufficient information.

a) At the profit maximizing output level, the firm's profit is: A) $1,200. B) $1,050. C) $750. D) $375. b) In the long-run we expect: A) more firms to enter the market. C) the average cost of production to decrease. D) the price of the good to increase. B) the firm's demand curve to shift to the right. c) At the profit maximizing output level, the is earning a A) positive economic profit and more firms are expected to enter the market. B) zero economic profit and no firms are expected to enter the market. C) negative economic profit and more firms are expected to leave the market. D) There is not sufficient information.

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Monopolistic Competition

Section: Chapter Questions

Problem 8PA

See similar textbooks

Similar questions

ICE (Dollars per scooter) 3. How short-run profit or losses induce entry or exit Citrus Scooters is a company that manufactures electric scooters in a monopolistically competitive market. The following graph shows the demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC) for Citrus. Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss 500 450 400 360 200 250 200 150 400 50 MC- ATC MR Demand 150 200 250 300 360 400 450 500 QUANTITY (Scooters) + Monopolistically Competitive Outcome Profit or Loss (?) Given the profit-maximizing choice of output and price, Citrus Scooters is earning sellers in the industry relative to the long-run equilibrium amount. Now consider the long run in which scooter manufacturers are free to enter and…
(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)
7. Price discrimination and welfare Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the…
7. Price discrimination and welfare Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the…
(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.
3. Monopolistic competition in the short run Consider a shop that produces muffins in a monopolistically competitive market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the company is operating in the short run. PRICE AND COSTS (Dollars per muffin) $3.50 $2.75 $2.50 $1.90 $1.00 The profit-maximising level of output is At the profit-maximising output and price, the shop's profit equals Given the profit-maximising choice of output and price, the shop is making there are 1 I MR MC 1 1 1 Demand 230 280 QUANTITY (Muffins per day) muffins per day at a price of 160 ATC each. profit, which means that shops in the industry relative to the long-run equilibrium.
7. Price discrimination and welfare Suppose Clomper's is a monopolist that manufactures and sells Stompers, an extremely trendy shoe brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Clomper's faces, as well as its marginal cost (MC), which is constant at $30 per pair of Stompers. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Clomper's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Clomper's cannot price discriminate. That is, it must charge each consumer the same price for Stompers regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the…
Refer to Figure 1. If the market price is $2, what the firm will do? Enable Editing 4) Use the figure below to answer the following questions. Price and cost (dollars per unit) 80 MC 60 40 ATC 20 MR 20 40 60 80 100 Quantity (units per week) Figure 2 a) Refer to Figure 2 If this firm is in monopolistic competition, what is its output? b) Refer to Figure 2 If this firm is in monopolistic competition, what is the price it will charge? c) Refer to Figure 2. What is the firm profit situation? What time frame equilibrium is the firm? d) Refer to Figure 2. If this firm in monopolistic competition is in short-run equilibrium, and the firm making profit what will happen in the long run to the firm profit? explain
HW#5 (Monopoly, Monopolistic Competition, Oligopoly) Back to Assignment Attempts: Keep the Highest: /3 2. The components of marginal revenue Jake's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Jake produced seven fire engines, but he has decided to increase production to eight fire engines. The following graph shows the demand curve Jake faces. As you can see, to sell the additional engine, Jake must lower his price from $100,000 to $50,000 per fire engine. Note that while Jake gains revenue from the additional engine he sells, he also loses revenue from the initial seven engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial seven engines by selling at $50,000 rather than $100,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. (?…
7. Suppose you are employed at a monopolistic company as a research (pricing) economist and you are deriving the behavior of two markets based on demand curves given by:D1(p1) = 50 − p1D2(p2) = 50 − 2p2 Assume that the marginal cost is constant at $8 a unit.(a) If it can price discriminate, what price should it charge in each market in order to maximize profits? (b) If it can’t price discriminate, what price should it charge? 8. Pele enjoys coffee (C) and tea (T) according to the function Replace 'Pele' with Alana U(C, T) = 3C + 4T(a) What does her utility function say about her MRS of coffee and tea?(b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend on these products,i. How much coffee and tea should she buy to maximize her utility? ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point.(c)…
37 - At what point should the monopolistic firm produce in order to maximize its profit in the short run? a) MR=AVC B) MC=MR C) MC=AVC D) MR=AC TO) MC=AC
2. Understanding excess capacity The following table shows the daily cost data and demand schedule for a typical firm producing board games in a monopolistically competitive market in the short run. Fill in the values in the Marginal Cost, Total Revenue, and Marginal Revenue columns in the following table and then answer the questions that follow. Quantity Price Total Cost Marginal Cost (Board games) (Dollars per game) (Dollars) (Dollars) 123456 15.00 15 12.00 20 10.00 27 8.00 32 6.00 35 6 7 8 4.00 42 3.00 48 1.00 56 Total Revenue (Dollars) Marginal Revenue (Dollars) Average Total Cost (Dollars) Under monopolistic competition, a typical firm will produce board games at a price of $ per board game in the short run. Based on your calculations, the firm will Fill in the Average Total Cost column in the previous table. Based on your calculations, the level of excess capacity in this monopolistically competitive market is