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4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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. Nex 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 razor) 100 90 80 70 60 50 40 30 20 MC 10 ATC MR Demand 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Mon Comp Outcome * Min Unit Cost at the optimal quantity the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for razors. True False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of externality implies that there is too much entry of new firms in the market. the

4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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. Nex 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 razor) 100 90 80 70 60 50 40 30 20 MC 10 ATC MR Demand 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Mon Comp Outcome * Min Unit Cost at the optimal quantity the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for razors. True False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of externality implies that there is too much entry of new firms in the market. the

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter14: Monopolistic Competition And Product Differentiation
Section: Chapter Questions
Problem 5P
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4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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. Nex 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 razor) 100 90 80 70 60 50 40 30 20 MC 10 ATC MR Demand 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Mon Comp Outcome * Min Unit Cost at the optimal quantity the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for razors. True False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of externality implies that there is too much entry of new firms in the market. the
Transcribed Image Text:4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for electric razors. 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. Nex 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 razor) 100 90 80 70 60 50 40 30 20 MC 10 ATC MR Demand 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Mon Comp Outcome * Min Unit Cost at the optimal quantity the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for razors. True False Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of externality implies that there is too much entry of new firms in the market. the
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