Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 13.4.6PA
Subpart (a):
To determine
Whether the firm belongs to a
Subpart (b):
To determine
Whether the firm belongs to a perfectly competitive market or to a monopolistically competitive market.
Subpart (c):
To determine
Whether the firm belongs to a perfectly competitive market or to a monopolistically competitive market.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
K
Suppose the figure to the right represents the market for a particular brand
of shampoo, such as L'Oreal, Lancome, or Maybelline.
Assume the market is monopolistically competitive.
What is the firm's profit-maximizing price and quantity?
thousand
per bottle. (Enter your
The monopolistically competitive firm's profit-maximizing quantity is
bottles of shampoo, and its profit-maximizing price is $
responses as integers.)
Price and cost (per bottle)
♫
3.00-
MC
2.80-
ATC
2.60-
2.40-
2.20-
2.00-
1.80-
1.60-
1.40-
1.20-
1.00-
0.80-
0.60-
0.40-
0.20-
0.00+
0
MR
2 4 6 8 10 12 14 16 18 20 22 24
Quantity (shampoo bottles in thousands)
What does it mean to say that: “A firm operating under perfect competition conditions is a pricetaker"?Why Can't this firm set any price it chooses? What if it operates in a monopolisticallycompetitive market, would it be able to set the price? Why? Give some real life examples tosupport your answer.2. You overheard Mr. John, the newly-hired marketing manager, saying: “I think our company shouldtake advantage of economies of scale by increasing output, thereby spreading out our overheadfixed costs”.Would you agree with this statement? If not, provide a better description for the term“economies of scale”. Explain how they may be achieved by organizations. Highlight what wouldprevent them to occur.3. For many, the principle “marginal revenue equal marginal cost" condition for profit maximizationis rather confusing.Discuss the rationale behind the condition, highlighting how different it is from the break-evenanalysis
Briefly explain using a graph whether given statement is true or false. “If firms in a monopolistically competitive industry are earning economic profits, new firms will enter the industry. Eventually, the representative firm will find that its demand curve has shifted to the left until it is just tangent to its average cost curve and it is earning zero profit. Because firms are earning zero profit at that point, some firms will leave the industry, and the representative firm will find that its demand curve will shift to the right. In long-run equilibrium, price will be above average total cost and each firm with make economic profit.”
Chapter 13 Solutions
Microeconomics (7th Edition)
Ch. 13 - Prob. 13.1.1RQCh. 13 - Prob. 13.1.2RQCh. 13 - Prob. 13.1.3RQCh. 13 - Prob. 13.1.4PACh. 13 - Prob. 13.1.5PACh. 13 - Prob. 13.1.6PACh. 13 - Prob. 13.1.7PACh. 13 - Prob. 13.1.8PACh. 13 - Prob. 13.1.9PACh. 13 - Prob. 13.1.10PA
Ch. 13 - Prob. 13.2.1RQCh. 13 - Prob. 13.2.2RQCh. 13 - Prob. 13.2.3RQCh. 13 - Prob. 13.2.4PACh. 13 - Prob. 13.2.5PACh. 13 - Prob. 13.2.6PACh. 13 - Prob. 13.2.7PACh. 13 - Prob. 13.2.8PACh. 13 - Prob. 13.2.9PACh. 13 - Prob. 13.3.1RQCh. 13 - Prob. 13.3.2RQCh. 13 - Prob. 13.3.3RQCh. 13 - Prob. 13.3.4RQCh. 13 - Prob. 13.3.5PACh. 13 - Prob. 13.3.6PACh. 13 - Prob. 13.3.7PACh. 13 - Prob. 13.3.8PACh. 13 - Prob. 13.3.9PACh. 13 - Prob. 13.3.10PACh. 13 - Prob. 13.3.11PACh. 13 - Prob. 13.3.12PACh. 13 - Prob. 13.4.1RQCh. 13 - Prob. 13.4.2RQCh. 13 - Prob. 13.4.3RQCh. 13 - Prob. 13.4.4RQCh. 13 - Prob. 13.4.5PACh. 13 - Prob. 13.4.6PACh. 13 - Prob. 13.4.7PACh. 13 - Prob. 13.4.8PACh. 13 - Prob. 13.4.9PACh. 13 - Prob. 13.5.1RQCh. 13 - Prob. 13.5.2RQCh. 13 - Prob. 13.5.3PACh. 13 - Prob. 13.5.4PACh. 13 - Prob. 13.5.5PACh. 13 - Prob. 13.5.6PACh. 13 - Prob. 13.5.7PACh. 13 - Prob. 13.6.1RQCh. 13 - Prob. 13.6.2RQCh. 13 - Prob. 13.6.3PACh. 13 - Prob. 13.6.4PACh. 13 - Prob. 13.6.5PACh. 13 - Prob. 13.6.6PACh. 13 - Prob. 13.1CTECh. 13 - Prob. 13.2CTECh. 13 - Prob. 13.3CTE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Questions Why does Google care whether people think it is large or small? Do highway billboards actually provide competition for Google? Briefly explain.arrow_forwardMarginal revenue and marginal cost intersect at point Multiple Choice C. d. a. b.arrow_forwardUsing only things found in an average home, please provide one example of something from each kind of market, and briefly explain why this thing is in that particular market. Try to be creative. You will need an example of something from a: Perfectly competitive market Imperfectly competitive market (monopolistically competition or oligopoly), and Monopoly marketarrow_forward
- The following graph represents a monopolistically competitive firm in long-run equilibrium. Place the black point (cross sign) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Next, place the grey star on the graph to indicate the point where the LRAC reaches a minimum. PRICE PER UNIT (Dollars) 500 450 400 350 300 250 200 150 100 50 MC 0 0 50 LRAC MR Demand 100 150 200 250 300 350 400 450 500 QUANTITY (Units) Monopolistically Competitive Outcome Minimum of the LRAC The long-run equilibrium price is $ (Hint: Use the graph to find the numeric value of the price at equilibrium.) The long-run equilibrium quantity is units. The LRAC curve is at its minimum at a quantity of The long-run equilibrium price is units. the marginal cost of producing the equilibrium output. ?arrow_forwardSuppose, you're going to open a new fast food business. Briefly discuss the factors that would possibly affect your fast food business's pricing decisions.arrow_forwardWestchesser Gloves is a monopolistically competitive firm that sells leather gloves. Use the graph to highlight the area of profit or loss and answer the questions, Price per pair (5) 10 20 Marginal profit or loss: $ Aver co Pairs of gloves (in thousand) Demand 70 80 90 100 Profit or loss Calculate Westchesser's profit or loss at the profit-maximizing price. What will happen to the number of firms in this industry in the long run? Firms will enter this industry, increasing the price at which each firm can sell their gloves until firms begin to earn normal profits. O Firms will exit this industry, increasing the price at which each firm can sell their gloves until firms begin to carn normal profits. O Firms will exit this industry, decreasing the price at which each firm can sell their gloves until firms begin to carn normal profits. O Firms will enter this industry, decreasing the price at which each firm can sell their gloves until firma begin to carn normal profitsarrow_forward
- ext pages In the following graph, indicate the area representing the Red Robin restaurant's profit when the demand curve is D, and the area representing its loss when the demand curve is D2. 1.) Using the rectangle drawing tool, shade in Red Robin's profit when demand is D₁. Label your area 'Profit.' 2.) Using the rectangle drawing tool, shade in Red Robin's loss when demand is D2. Label your area 'Loss.' Carefully follow the instructions above and only draw the required objects. Grapher MacBook Air Price (dollars per hamburger) MC ATC Q MR2 MR₁ Quantity (hamburgers per week) D2 D1 Clear all Check answerarrow_forward1. Consider the following graph: Price (dollars per cup) $6.00 MC ATC 3.50 Profit 2.50 Demand 0 1 2 3 45 6 7 8 9 10 Quantity (cafe lattes per week) Profit-maximizing quantity of caté lattes MR a) Is it possible to say whether this firm is a perfectly competitive firm or a monopolistically competitive firm.arrow_forwardSally runs a vegetable stand. The following table shows two points on the demand curve for the heirloom tomatoes she sells: Price $3.50 $2.25 Quantity demanded per week 150,000 250,000 Sally's marginal revenue from lowering the price of tomatoes from $3.50 to $2.25 is $ 0.375. (Enter your response rounded to two decimal places.) Lowering the price from $3.50 to $2.25 results in an output effect of $ and a price effect of $. (Enter your responses as whole numbers and include a minus sign if necessary.)arrow_forward
- Which basic competitive strategy does Google follow?arrow_forward3. 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? a. P < MC, P > ATC b. P > MC, P < ATC c. P = MC, P > ATC d. P > MC, P = ATCarrow_forwardExplain the profit-maximizing output leveland profitof a monopolistic firm by drawing a graph. What are the advantages of internal economies of scale? Explain them briefly. What is the meaning of ‘acceptable loss’for a perfectly competitive firm ? Draw a graph and explain. How can we increase the Total Revenue of productsby using elasticity? Explain them briefly.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc