Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 11.3, Problem 2ST
To determine
Determine whether an oligopolistic firm is a price taker or a price searcher.
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You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If not, what should it do to increase profit? If the firm is maximizing profit, is the market in a long-run equilibrium? If not, what will happen to restore long-run equilibrium?
P < MC, P > ATC
P > MC, P < ATC
P = MC, P > ATC
P > MC, P = ATC
You are a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost.
P = MC, P > ATCP > MC, P = ATC
Illustrating with graph(s), can the firm possibly be maximising profit? If not, what should it do to increase profit? If the firm is profit-maximising, is the firm in a long-run equilibrium? If not, what will happen to restore long-run equilibrium?
PLZ EXLAIN MORE DETAILS AND WRITE IT CLEARLY THX!!!
You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost:
P>MC, P<ATCP>MC, P<ATC
Which of the following statements are true about this firm and the market? Check all that apply.
Some firms will exit the market.
This firm is in long-run equilibrium.
This firm is possibly maximizing profit.
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- An industry said to be characterized by monopolistic competition is the apparel industry. Suppose you were hired as a consultant by a firm in this industry. How would you advise the firm as to the levels of output, price, input usage, and advertising? What problems might the firm encounter?arrow_forwardYour friend Stan owns a coffee shop in a monopolistically competitive industry. One day, Stan tells you (an economist) that he is earning an economic profit and is setting his price equal to his marginal cost. Is Stan producing the profit-maximizing amount of coffee? What should he do?arrow_forwarddraw a profit-maximizing monopolistically competitive firm earning zero economic profits. then show what happens if 100 more firms were added to this industry.arrow_forward
- 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?arrow_forwardExplain if excess profit will exist in the long run for an oligopolistic market.arrow_forwardYou are the manager of a monopolistically competitive firm, and your demand and cost functions are estimated as Q = 25 - P and C = Q² +2Q + 2. What is the firm's maximum profit?arrow_forward
- When oil prices increased 10 fold during the 1973 – 80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy?arrow_forwardExplain how a price taker firm could use monopolistic competition to become a price searcher.arrow_forwardYou are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost: P=MC, P>ATCP=MC, P>ATC Which of the following statements are true about the firm? Check all that apply. The firm can increase its profit by reducing its output. The firm is possibly maximizing profit. The firm is in long-run equilibrium.arrow_forward
- 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.arrow_forwardSuppose you manage a local grocery store, and you learn that a very popular national grocery chain is about to open a store just a few miles away. Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). What will happen to your profits? Explain your reasoning in detail. How and why do profits change? What could you do to defend your market share against the new store?arrow_forwardA monopolistically competitive firm maximize profit wherearrow_forward
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