Explanation Part (a) Magnificent Bloom, a florist is operating in a monopolistically competitive industry. It is a successful operation producing the quantity that minimizes its average total cost and making a profit. At his current level of output, its marginal cost is above its marginal revenue Refer the table below for the revenue and cost figures of the florist: Quantity(Units of flowers produced in hundreds ) Price ($ per hundred units) or Average Revenue (AR) Total Revenue (TR) Marginal revenue (MR) Total Cost (TC) in $ hundreds Average Cost (AC) Marginal Cost (MC) Profit (AR-AC) 1 20 20 20 15 15 15 5 2 18 36 16 29 14.5 14 3.5 3 16 48 12 40 13.33 10 2.67 4 14 56 8 45 11.25 5 2.75 5 12 60 4 55 11 10 1 6 10 60 0 70 11.66 15 -1.66 7 8 56 -4 90 12.85 20 -4.85 8 6 48 -8 115 14.375 25 -8.375 9 4 36 -12 145 16.11 30 -12...

Equilibrium price , quantity and profits in the monopolistically competitive markets. Concept Introduction: Monopolistic Competition - An imperfect market competition where there are large numbers of sellers selling differentiated product and is called monopolistic competition. It exhibits the elements of both a monopoly and perfect competition . The defining characteristics of the market are- It has a large number of firms, relative free entry and exit of firms, product differentiation, imperfect information, transportation costs, inelastic demand and inefficient production.

Microeconomics

5th Edition

ISBN: 9781319098780

Author: Paul Krugman, Robin Wells

Publisher: Worth Publishers

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Chapter 15, Problem 5P

To determine

Equilibrium price, quantity and profits in the monopolistically competitive markets.

Concept Introduction:

Monopolistic Competition - An imperfect market competition where there are large numbers of sellers selling differentiated product and is called monopolistic competition. It exhibits the elements of both a monopoly and perfect competition. The defining characteristics of the market are- It has a large number of firms, relative free entry and exit of firms, product differentiation, imperfect information, transportation costs, inelastic demand and inefficient production.

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