Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 26, Problem 10E
To determine
To compute:
The output that the firm would be producing.The situation, long run or short run, considering the output produced by the firm. Also, explain the effecton the
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- The diagram shows a firm that produces tennis rackets in a monopolistically competitive market. Assume that it is operating in the short run. Is the firm earning a positive profit or suffering a loss in the short run? Explain what will happen to a typical firm in this industry in the long run, including characteristics of the firm in long run equilibrium. A diagram may be used as part of the explanation, but is not required.arrow_forwardIn the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a grapharrow_forwardWhy 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. 21arrow_forward
- a) Can the threat of a price war deter entry by potential competitors? What actions might a firm take to make this threat credible? b)Why is the firm’s demand curve flatter than the total market demand curve in monopolistic competition? Suppose a monopolistically competitive firm is making a profit in the short run. What will happen to its demand curve in the long run?arrow_forwardThe diagram above shows a monopolistically competitive firm in the long run. Answer the questions below. Using the points displayed on the diagram, name the rectangular area that represents the profit or loss. What should the firm do regarding price and/or quantity to minimize its losses?arrow_forwardTurn this assignment in on Blackboard by January 3, 1 PM China time. There are 13 questions.< 1. Suppose a city experiences substantial population growth. What is likely to happen to profits in the short run and in the long run in the market for haircuts, a monopolistically competitive market?arrow_forward
- Which type of a firm, monopolistically competitive or a monopoly, will have a greater incentive to advertise its product? Please give an explanation.arrow_forwardWhy is a competitive market generally better for society than a monopolistic market?arrow_forwardAn 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?arrow_forward
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