Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Chapter 10, Problem 4SQP
To determine
Whether to agree to the given statement.
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In long run equilibrium, economic profits tend to zero in a perfectly competitive market and also in a monopolistically competitive market. This is true because both market structures share a crucial characteristic. What is the characteristic that causes economic profits to get pushed towards zero in both perfect competition and monopolistic competition?
The diagram above represents a monopolistically competitive firm. Answer the questions below.
Is this firm operating in the short-run or long-run? How do you know?
Calculate this firm’s accounting profit.
From the diagram, what is the productively efficient output for this firm?
From the diagram, economies of scale are maximized at which output level? Explain.
From the diagram, what is the allocatively efficient output for this firm? Explain.
The diagram above represents a monopolistically competitive firm. Answer the questions below.
From the diagram, economies of scale are maximized at which output level? Explain.
From the diagram, what is the allocatively efficient output for this firm? Explain.
Chapter 10 Solutions
Micro Economics For Today
Ch. 10.1 - Prob. 1YTECh. 10.5 - Prob. 1GECh. 10.6 - Prob. 1YTECh. 10 - Prob. 1SQPCh. 10 - Prob. 2SQPCh. 10 - Prob. 3SQPCh. 10 - Prob. 4SQPCh. 10 - Prob. 5SQPCh. 10 - Prob. 6SQPCh. 10 - Prob. 7SQP
Ch. 10 - Prob. 8SQPCh. 10 - Prob. 9SQPCh. 10 - Prob. 10SQPCh. 10 - Prob. 11SQPCh. 10 - Prob. 12SQPCh. 10 - Prob. 13SQPCh. 10 - Prob. 1SQCh. 10 - Prob. 2SQCh. 10 - Prob. 3SQCh. 10 - Prob. 4SQCh. 10 - Prob. 5SQCh. 10 - Prob. 6SQCh. 10 - Prob. 7SQCh. 10 - Prob. 8SQCh. 10 - Prob. 9SQCh. 10 - An oligopoly is a market structure in which a. one...Ch. 10 - Prob. 11SQCh. 10 - A common characteristic of oligopolies is a....Ch. 10 - Prob. 13SQCh. 10 - Prob. 14SQCh. 10 - Prob. 15SQCh. 10 - Prob. 16SQCh. 10 - Prob. 17SQCh. 10 - Prob. 18SQCh. 10 - Prob. 19SQCh. 10 - The kinked oligopoly demand curve is a result of...
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- encient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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. 3; 100 50 90 80 88 + 70 70 60 550 40 PRICE (Dollars per razor) 30 30 10 MC 20 20 0 10 10 ATC +. ? Mon Comp Outcome MR Demand 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Min Unit Costarrow_forwardHow many of the following statements are true about monopolistic competition at long run equilibrium?arrow_forwardDiscuss to what extent you agree with the following statements. Monopolistically competitive firms are producing efficiently because P=MC in the long-run.arrow_forward
- Consider a shop that produces bagels 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. At the profit-maximizing output and price, the shop's economic profit equals $. Note: If the firm is earning an economic loss be sure to include a negative sign. PRICE (Dollars per bagel) $7.00 $5.50 $4.00 $2.00 I 1 I " I I IMR 160 type your answer... I I 230 280 MC ATC Demand QUANTITY (Bagels)arrow_forwardRefer to the graphic above. The output produced in this market (Monopolistic) is ____ units, while produced under a comparable perfectly competitive market would have been at least ____ units.arrow_forwardIn the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a grapharrow_forward
- Susan owns a restaurant that sells hamburgers in a monopolistically competitive market. The graph to the right depicts the demand and marginal revenue for her hamburgers. Suppose that Susan's restaurant is maximizing profits at 35 hamburgers (per day). Assume that the monopolistically competitive industry is at a long-run equilibrium. Use the three-point curve drawing tool to add Susan's long run average cost (ATC) curve to the graph. Properly label this curve. Carefully follow the instructions above, and only draw the required objects. ul Price and cost (dollars per hamburger) 2.00- 2.25- 2.00- 1.75 1.50- 1.25 1.00- 0.75- 0.50 0.25 0 MR 10 20 30 40 50 60 70 80 Quantity of hamburgers (per day) ATC D 90 100 a Garrow_forwardSuppose 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. Nex 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 70 60 50 ATC 20 40 30 20 10 10 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 at the optimal the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that P= ATC quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates…arrow_forwardWhat are the “monopolistic” and the “competitive” elements of monopolistic competition?Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a monopoly, a monopolistic competitor: can restrict output to increase price (at least in the short run).checked can make profits or losses in the short run.unanswered faces a downward-sloping demand curve.unanswered faces high barriers to entry.unanswered makes economic profits in the long run.unanswered produces where P > MR = MC.unanswered has one seller.unanswered Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a perfect competitor, a monopolistic competitor: faces a perfectly elastic demand…arrow_forward
- 9 . Perfect Competition The market for peanut butter in Nutville is monopolistically competitive and in long-run equilibrium. The following graph shows the marginal-cost (MC) curve and the average-total-cost (ATC) curve for a peanut-butter-producing firm. It also shows the demand curve and marginal-revenue (MR) curve faced by a firm operating in a monopolistically competitive environment. On the following graph, use the black point (plus symbol) to show the profit-maximizing output and price for a typical firm operating in a monopolistically competitive environment. Demand Profit Max Under MC Perfect Comp. Outcome ATC MC MR Quantity Price, Cost, Revenuearrow_forwardExplain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect competition?arrow_forwardWhat does it mean to say that: “A firm operating under perfect competition conditions is a price taker"?Why Can't this firm set any price it chooses? What if it operates in a monopolistically competitive market, would it be able to set the price? Why? Give some real-life examples to support your answer.Discuss the rationale behind the principle “marginal revenue equal marginal cost" condition for profit maximization.arrow_forward
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