**Table 16-7: A Monopolistically Competitive Firm's Demand Schedule**A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.| Price | Quantity ||-------|----------|| $30 | 1 || $26 | 2 || $22 | 3 || $18 | 4 || $14 | 5 || $10 | 6 || $6 | 7 |**Question:**Refer to Table 16-7. If the firm produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is correct?- a. This firm is operating at its efficient scale.- b. This firm should expect its demand curve to shift to the left.- c. Firms will leave the market and profits for firms that remain in the market will rise.- d. This firm is in a long-run equilibrium.**Options to Proceed:**- Save & Continue- Continue without saving*Note: Analyze the relationship between price and quantity to determine the profit-maximizing output, considering the given marginal cost and total fixed costs.*

the following table calculates the total and marginal revenue of the firm from its demand schedule: A monopolistic competitive firm will maximize its profits when the marginal revenue is equal to the marginal cost. The marginal cost is given $7. Since there is no point in the schedule where marginal revenue is $7 firm will produce 3 units where marginal revenue is $14 which is greater than marginal cost. The firm will not produce 4 units where marginal revenue is $6 because at that point the marginal cost ($7) exceeds the marginal revenue ($6). We know that when MC (marginal cost) is constant then , MC = AVC (average variable cost) Thus, ATC=AFC+AVCATC=AFC+MCAlso, TC=ATC×QSubstituing the values of AFC, Q and MC;TC=(203+7)×3TC=20+21TC=$41 Thus, π=TR-TCπ=66-41π=$25With the firm earning a profit of $25;. The firm will not leave the market and profits for the firm that remain in the market will rise; thus, option (c) is incorrect. The firm should not expect it demand curve to rise, rather other firms will enter thus, a shift in supply curve will be noticeable; thus, option (b) is incorrect. Since the firm is earning profits, the firm is not in long run because in long run the firm economic profit is 0; thus, option (d) is incorrect. Finally since the marginal revenue is greater than the marginal cost the firm is operating in the efficient scale thus, option (a) is correct. To conclude, the correct option is (a).

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A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. Price Quantity $30 $26 $22 $1s $14 $10 $6 Refer to Table 16-7. If the firm produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is correct? Oa. This firm is operating at its efficient scale. Ob. This firm should expect its demand curve to shift to the left. OC. Firms will leave the market and profits for firms that remain in the market will rise. Od. This firm is in a long-run equilibrium.

A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. Price Quantity $30 $26 $22 $1s $14 $10 $6 Refer to Table 16-7. If the firm produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is correct? Oa. This firm is operating at its efficient scale. Ob. This firm should expect its demand curve to shift to the left. OC. Firms will leave the market and profits for firms that remain in the market will rise. Od. This firm is in a long-run equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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