Principles of Microeconomics California Edition 2nd Edition
2nd Edition
ISBN: 9780393622089
Author: Dirk Mateer, Lee Coppock
Publisher: W. W. Norton
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Question
Chapter 12, Problem 5QR
To determine
The regulation of a monopolistic competitive market.
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Monopolistically competitive firms could increase the quantity they produce and potentially lower the average total cost of production. Why don't they do so?
How does the short run differ from the long run in a monopolisticallycompetitive market?
Why is a competitive market generally better for society than a monopolistic market?
Chapter 12 Solutions
Principles of Microeconomics California Edition 2nd Edition
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- Why is monopolistic competition said to be inefficient?Suppose that you counted the higher price the consumer pays for the monopolistically competitive firm's product as part of consumer surplus. Would that change the conclusion regarding the efficiency of monopolistic competition?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_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
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