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- A publisher faces the following demand schedule for the next novel from one of its popular authors:Price Quantity Demanded100 090 100,00080 200,00070 300,00060 400,00050 500,00040 600,000 530 700,00020 800,00010 900,0000 1,000,000The author is paid $2 million to write the book, and the marginal cost of publishing the book is a constant $30 per book.d. In your graph, shade in the deadweight loss. Explain in words what this means. e. If the author was paid $3 million instead of $2 million to write the book, how would this affectthe publisher’s decision regarding the price to charge? Explain. f. Suppose the publisher was not profit-maximizing but was concerned with maximizing economicefficiency. What price would it charge for the book? How much profit would it make at thisprice? (2. Entry or exit in the long run Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). 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 Monopolistically Competitive Outcome 400 350 300 Profit or Loss A ATC 250 200 150 MC 100 50 MR Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bikes) Given the profit-maximizing choice of output and price, the shop is earning profit, which means there are shops in the industry than in long-run equilibrium. PRICE (Dollars per bike)The following are excerpts from the article: Stirring the Pot . $80 Coffee Beans – Yikes! Bangor Times. May 22nd, 2016. “ The Third Wave in coffee refers to the growth of small, independent coffee roasters who developed as an alternative to Starbucks when that company grew and disaffected coffee drinkers looked for alternative sources for their caffeinated drinks." “..companies of this type provide a relatively small clientele with great tasting coffees and verified attributes in the sourcing of coffee beans- organic, shade-grown, bird friendly, direct trade (it's better than fair trade), single-farm sourced, etc". "For a Third Wave coffee company, the goal is to satisfy existing consumer interest or create new consumer interest in attributes that its customers believe only that company can offer." ...firms are always trying to create new and better differentiation to set themselves apart from those who have been successfully earning monopoly profits. This very phenomenon is seen as…
- The following are excerpts from the article: Stirring the Pot . $80 Coffee Beans – Yikes! Bangor Times. May 22nd, 2016. “ The Third Wave in coffee refers to the growth of small, independent coffee roasters who developed as an alternative to Starbucks when that company grew and disaffected coffee drinkers looked for alternative sources for their caffeinated drinks." "..companies of this type provide a relatively small clientele with great tasting coffees and verified attributes in the sourcing of coffee beans- organic, shade-grown, bird friendly, direct trade (it's better than fair trade), single-farm sourced, etc". "For a Third Wave coffee company, the goal is to satisfy existing consumer interest or create new consumer interest in attributes that its customers believe only that company can offer." ...firms are always trying to create new and better differentiation to set themselves apart from those who have been successfully earning monopoly profits. This very phenomenon is seen as…In which of the following situations would Maria's Doughnut Shop have the MOST market power? Select one: a. The closest doughnut shop or bakery is 25 miles away from Maria's shop. b. There are two rival doughnut shops within three miles but no other bakeries. c. The closest doughnut shop is 10 miles away, but there is a bakery with breakfast pastries two miles away. d. Within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries.Which of the following is true regarding monopolistic competition? Ⓒa. Each firm behaves as a monopolist, but makes no profits in the long run due to competition from close substitutes b. Save your money, and only purchase the railroads and high-end properties on the board (i.e. red, yellow, green, and blue) c. There is no such thing as monopolistic competition, it is an oxymoron d. Firms behave competitively, but they make profits in the long run because there are some barriers preventing entrepreneurs from entering the market
- A perfectly competitive firm is onsidered to be more generous in terms of price and quantity of output in comparison to firm belonged to monopoly and monopolistic markets. C. If firms incurring loss in this market begin to exit the market, what will happen to the market equilibrium? Demonstrate your answer using a simplified graph. d. The firm wishes to supply output more than the quantity determined under the equilibrium condition, is it worth to pursue?A publisher faces the following demand schedule for the next novel from one of itspopular authors:Price Quantity Demanded$ 100 0 novels90 100,00080 200,00070 300,00060 400,00050 500,00040 600,00030 700,00020 800,00010 900,0000 1,000,000The author is paid $2 million to write the book, and the marginal cost of publishingthe book is a constant $10 per book.a. Compute total revenue, total cost, and profit at each quantity. What quantity woulda profit-maximizing publisher choose? What price would it charge?b. Compute marginal revenue. (Recall that MR = ΔTR/ΔQ.) How does marginal revenuecompare to the price? Explain.C. Graph the marginal-revenue, marginal-cost, and demand curves. At what quantitydo the marginal-revenue and marginal-cost curves cross? What does this signify?d. In your graph, shade in the deadweight loss. Explain in words what this means e. If the author were paid $3 million instead of $2 million to write the book, how wouldthis affect the publisher’s decision regarding what…Which of the following statements is correct? a. In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity. b. A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale. c. For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve. d. All of the above are correct.
- 1. Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________. 2. In the model of monopolistic competition, if the price is ______ than average costs, then firms are earning __________ economic profit and we should expect firms to _________ the industry. 3. In the model of monopolistic competition, if an industry has large ________ relative to another industry, then we should expect _________ firms to operate in a long-run equilibrium of that industry.The following are excerpts from the article: Stirring the Pot . $80 Coffee Beans – Yikes! Bangor Times. May 22nd, 2016. “ The Third Wave in coffee refers to the growth of small, independent coffee roasters who developed as an alternative to Starbucks when that company grew and disaffected coffee drinkers looked for alternative sources for their caffeinated drinks." "...companies of this type provide a relatively small clientele with great tasting coffees and verified attributes in the sourcing of coffee beans- organic, shade- grown, bird friendly, direct trade (it's better than fair trade), single-farm sourced, etc". "For a Third Wave coffee company, the goal is to satisfy existing consumer interest or create new consumer interest in attributes that its customers believe only that company can offer." "...firms are always trying to create new and better differentiation to set themselves apart from those who have been successfully earning monopoly profits. This very phenomenon is seen as…(a) What is meant by consumer surplus and producer surplus? Using a diagram show that there is a deadweight loss to society from monopoly in terms of total surplus. (b) In what ways is a monopolistically competitive firm likely to be less efficient than one under perfect competition?