Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 14, Problem 10P
To determine
(a)
To explain:
The relationship ofprice with MC and
To determine
(b)
To explain:
The relationship of price with MC and ATC when monopolistically competitive firm earns economic loss.
To determine
(c)
To explain:
The relationship of price with MC and ATC when monopolistically competitive firm earns zero economic profit.
To determine
(d)
To explain:
The relationship ofprice with MC and ATC in a long run equilibrium of a monopolistically competitive firm.
Expert Solution & Answer
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Students have asked these similar questions
Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:
a.
The price to rise and output to rise
b.
The price to fall and output to fall
c.
The price to rise and output to fall
d.
The price to fall and output to rise
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.
?
The graph below shows the demand curve for a perfectly competitive firm.
Suppose that firms in this industry discover a way to differentiate their products.
Using the line drawing tool, show how the firm's demand curve would be likely to change.
Label the new demand curve 'd,'.
Carefully follow the instructions above, and only draw the required objects.
Since the demand curve is downward sloping, the monopolistically competitive firm will set
a price
OA. that is less than marginal cost.
B. that is unrelated to marginal cost.
OC. that is equal to marginal cost.
D. that is greater than marginal cost.
Price
10-
Q
Q
Output
10
Knowledge Booster
Similar questions
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