Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 13.1, Problem 4QQ
To determine
Long run profit.
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Which of the following statements is correct?
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a. In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity.
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b. A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale.
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c. For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve.
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d. All of the above are correct.
What is the first item to identify when determining the short-run equilibrium for a monopolistically competitive firm?Â
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a. the total profitsÂ
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b. the total revenue
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d. the profit-maximizing level of output
The graph below summarizes the demand and costs for a firm that operates in a monopolistically competitive market.Instruction: Use the nearest whole numbers on the graph when calculating numerical responses below.a. What is the firm’s optimal output? unitsb. What is the firm’s optimal price?$ c. What are the firm’s maximum profits?$ d. What adjustments should the manager be anticipating?multiple choice
Demand will decrease over time as new firms enter the market.
Demand will increase over time as firms exit the market.
Demand will remain unchanged over time.
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- The market for Banh Mi in Auckland CBD consists of 6 restaurants operating in monopolistic competition. Suppose that these firms face monthly fixed costs of $5,000 and marginal costs of $3. a) Draw the average cost and marginal cost curves for a representative firm. b) If the short run market price is $6 and each firm sells 2000 units per month, what will occur in the long run? Explain and show on a graph. c) Suppose that Banh Mi become more popular as a lunch option, and market demand increases. Explain the short run and long run effects on the market, including price, firm-level quantity and number of firms. Use graphs to explain your answer.arrow_forwardAn industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called: a. monopoly. b. monopolistic competition. c. perfect competition. d. oligopoly.arrow_forwardA perfectly competitive firm is considered to be more generous in terms of price and quantity of output in comparison to firm belonged to monopoly and monopolistic markets. a. Demonstrate a simplified graph to show that a perfectly competitive firm incurring loss, but has reached the minimum condition to keep operating in the market. b. Does the firm operate in the short or long run based on your answer to question (a). Why?arrow_forward
- In the long run, the economic profits in a monopolistically competitive industry tend to go towards zero. The main reason for this is: Â a differentiated products. b diseconomies of scale. c increased regulatory pressure on profitable firms. d free entry.arrow_forwardAll of the following are characteristics of long-run equilibrium for firms in a monopolistically competitive market except: A. price equals marginal cost. B. price equals average total cost. C. price exceeds the minimum of average total cost. D. marginal cost equals marginal revenue.arrow_forwardA 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?arrow_forward
- Which of the following statements is true about the difference between monopoly and monopolistic competition? a.Monopolies always earn positive profits b.Monopolistically competitive firms have no barriers to entry or exit c.There is no different between monopoly and monopolistic competition d.Monopolistically competitive firms never earn positive profitsarrow_forwardIn the long run, the representative firm in monopolistic competition tends to have:Select one:a. a perfectly elastic demand curve.b. economic profits.c. maximized consumer utility.d. limited product differentiation.e. excess capacity.arrow_forward1. Nori is a firm that sells products in an industry with a very high concentration of sellers. Nori's production decisions must consider its competitors' possible production decisions. In which market must Nori operate? A-Perfect market B-Monopoly market C-Oligopoly market D-Monopsony market E-Monopolistic competition 2. Koel is the single producer of home air conditioners in its rural market. The firm's monthly demand is described by the equation P = 5000 − 5Q, where P is the price and Q is the quantity of units sold. Which of the following must be true of Koel? A-An increase in price decreases the quantity sold. B-It is a natural monopoly. C-A decrease in price decreases the quantity sold. D-Higher levels of output bring in increasingly lower total revenue if demand is elastic. E-Maintaining the current price decreases the quantity sold over time.arrow_forward
- The figure shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's profit-maximizing price? OA. $10 B. $4 OC. $8 OD. $12arrow_forwardMonopolistically competitive firms use product differentiation to a.limit the number of firms in the industry. b.ensure long-run profits. c.achieve market power. d.block other firms from entering the industry.arrow_forwardSince products are differentiated in_____ each firm faces a downward sloping demand curve, and firms have limited market power. a. Monopoly b. Perfect Competion c. Oligopoly d. Monopolistic Competetion e. All of the Abovearrow_forward
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