Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that for each firm. Further, the quantity the firm produces in long-run equilibrium is at the optimal quantity the efficient scale. True or False: This indicates that there is excess capacity in the market for jackets. ○ True ○ False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the externality implies that there is too little entry of new firms in the market. Suppose that a company operates in the monopolistically competitive market for denim jackets. 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. PRICE (Dollars per jacket) 100 90 80 50 ATC 30 2 8 8 2 2 2 2 ° 60 MC MR Demand 0 + 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) Mon Comp Outcome Min Unit Cost (?)
Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that for each firm. Further, the quantity the firm produces in long-run equilibrium is at the optimal quantity the efficient scale. True or False: This indicates that there is excess capacity in the market for jackets. ○ True ○ False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the externality implies that there is too little entry of new firms in the market. Suppose that a company operates in the monopolistically competitive market for denim jackets. 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. PRICE (Dollars per jacket) 100 90 80 50 ATC 30 2 8 8 2 2 2 2 ° 60 MC MR Demand 0 + 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) Mon Comp Outcome Min Unit Cost (?)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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