Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 17, Problem 4IAPA
To determine
Changes in demand for pizza due to advertisement of pizza online and prices of it are to be determined.
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The diagram above represents a monopolistically competitive firm. Answer the questions below.
Is this firm operating in the short-run or long-run? How do you know?
Calculate this firm’s accounting profit.
From the diagram, what is the productively efficient output for this firm?
From the diagram, economies of scale are maximized at which output level? Explain.
From the diagram, what is the allocatively efficient output for this firm? Explain.
Why is there a price markup over marginal cost in
monopolistic competition?
a downward-sloping demand curve, price exceeds
marginal cost
The graph shows the demand curve and marginal revenue
curve of Whitewater, Inc., a producer of rubber rafts in
monopolistic competition.
Draw the marginal cost curve if the firm produces 150 rafts
a week. Label it.
Draw a point at the intersection of the MC and MR curves.
Draw a point to show the price that Whitewater charges for
a raft when it produces 150 rafts a week.
Draw an arrow to show the amount of Whitewater's
markup.
What is Whitewater's markup?
Whitewater's markup is $750 a raft.
750-
675-
600-
525-
450-
375-
300-
225-
150-
75-
0
Price and cost (dollars per raft)
50
100
150
Quantity (rafts per week)
D
MR
200
>>> Draw only the objects specified in the
question.
21
The diagram above represents a monopolistically competitive firm. Answer the questions below.
From the diagram, economies of scale are maximized at which output level? Explain.
From the diagram, what is the allocatively efficient output for this firm? Explain.
Chapter 17 Solutions
Foundations of Economics (8th Edition)
Ch. 17 - Prob. 1SPPACh. 17 - Prob. 2SPPACh. 17 - Prob. 3SPPACh. 17 - Prob. 4SPPACh. 17 - Prob. 5SPPACh. 17 - Prob. 6SPPACh. 17 - Prob. 7SPPACh. 17 - Prob. 8SPPACh. 17 - Prob. 9SPPACh. 17 - Prob. 10SPPA
Ch. 17 - Washtenaw Dairy in Ann Arbor, Michigan, sells 63...Ch. 17 - Prob. 2IAPACh. 17 - Prob. 3IAPACh. 17 - Prob. 4IAPACh. 17 - Prob. 5IAPACh. 17 - Use the following information to work Problems 5...Ch. 17 - Prob. 7IAPACh. 17 - Prob. 8IAPACh. 17 - Prob. 9IAPACh. 17 - Prob. 1MCQCh. 17 - Prob. 2MCQCh. 17 - Prob. 3MCQCh. 17 - Prob. 4MCQCh. 17 - Prob. 5MCQCh. 17 - Prob. 6MCQCh. 17 - Prob. 7MCQ
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- Answer the question: Aside from advertising, how can monopolistically competitive firms increase demand for their products? What effect would doing this have on the elasticity of the firm’s perceived demand curve? Explain your answers.arrow_forwardAnswer all four questions! Is a monopolistically competitive firm productively efficient? How can you tell? Offer one reason why a monopolistically competitive firm might be productively inefficient. Is it allocatively efficient? How can you tell? Offer one reason why a monopolistically competitive firm might be allocatively inefficient.arrow_forwardA photocopy shop in a monopolistically competitive market could daily sell 17,600 copies at a price of 4 cents, or it could sell 26,400 copies at a price of 3 cents. a. The marginal revenue associated with this range of the business's demand curve is____ cent(s). b. Draw the relevant range of this business's demand curve and identify a point on its marginal revenue curve.arrow_forward
- 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.arrow_forwardThe accompanying graph depicts average total cost (ATC), marginal cost (MC), marginal revenue (M), and demand (D) facing a monopolistically competitive firm. 50 MC 45 Place point A at the firm's profit maximizing price and 40 quantity. 35 What is the firm's total cost? ATC 30 25 total cost: $ 20 15 What is the firm's total revenue? 10 total revenue: $ MR 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantity What is the firm's total profit? profit: $ Price and Cost (S)arrow_forwardThe graph shows the demand curve, marginal revenue curve, and marginal cost curve of Big Splash, Inc., a producer of wading pools in monopolistic competition. Draw a point at the firm's profit-maximizing price and quantity. Draw a vertical arrow that shows the firm's markup. Draw a shape that shows the firm's economic profit. Big Splash's markup is $ a pool. Big Splash's excess capacity is Big Splash's economic profit is $ 360 340- 320 300- 280- 260- 240- 220- 200- 180- 160- 140- 120- 100- 80- 60- 40+ Price and cost (dollars per pool) 0 10 MC 20 ATC D MR 30 40 50 60 70 80 Quantity (pools per week) >>> Draw only the objects specified in the question. Q Qarrow_forward
- The graph shows the demand curve, marginal revenue curve, and marginal cost curve of Java Time, Inc., a producer of espresso machines in monopolistic competition. Draw a point at the firm's the profit-maximizing price and quantity. Label it 1. Draw an arrow that shows Java Time's markup. Draw the average total cost curve such that Java Time does not have excess capacity. Label it. Draw a point at the intersection of the ATC curve and the MC curve. Label it 2. Java Time's markup is $a machine. 240 220- 200- 180- 160- 140 120- 100- 80- 60- 40- 20- 04 0 Price and cost (dollars per machine) MC 100 200 300 400 Quantity (espresso machines per week) D MR 500arrow_forwardQuestion 19 of 20 > O Macmillan Learning The accompanying graph depicts average total cost (ATC), marginal cost (MC), marginal revenue (M), and demand (D) facing a monopolistically competitive firm. Place point A at the firm's profit maximizing price and quantity. What is the firm's total cost? total cost: $ What is the firm's total revenue? total revenue: $ What is the firm's total profit? profit: $ Price and Cost ($) 50 45 40 35 30 25 20 15 10 5 MR MC ATC D 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantityarrow_forwardThe 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_forward
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