Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 14, Problem 2P
(a)
To determine
The effect of growth of internet on the price.
(b)
To determine
The reason for different prices charged by different retailers
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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?
Suppose that a company operates in the monopolistically competitive market for denim jackets. The following graph shows the demand curve,
marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.
Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,
place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.
?
100
PRICE (Dollars per jacket)
8
20
60
50
X
ATC
20
MC
MR
2 2 2 2
10
0
0
30 40 50 60 70
QUANTITY (Thousands of jackets)
10 20
80
Demand
90 100
Mon Comp Outcome
Min Unit Cost
Suppose that a company operates in the monopolistically competitive market for denim jackets. The following graph shows the demand curve,
marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.
Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,
place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.
?
PRICE (Dollars per jacket)
100
90
80
70
60
40
30
20
MC
10
ATC
MR
Demand
0
0 10
20
30
40
50
60
70 80 90 100
QUANTITY (Thousands of jackets)
+
Mon Comp Outcome
Min Unit Cost
Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that.
firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is
at the optimal quantity for each
the minimum average total cost.
Chapter 14 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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