a. What is the profit maximizing price and quantity when marginal cost is MC1? The firm will produce units at a price of $ . b. Suppose marginal cost increases to MC2, what is the profit maximizing price and quantity after marginal cost changes? The firm will produce units at a price of $ .

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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The graph below shows a demand curve for a firm operating in an oligopolistic market.

 

 

Instructions: Enter quantities as a whole number. Round prices 2 decimal places.

 

a. What is the profit maximizing price and quantity when marginal cost is MC1?

 

     The firm will produce  units at a price of $  .

 

b. Suppose marginal cost increases to MC2, what is the profit maximizing price and quantity after marginal cost changes?

 

     The firm will produce  units at a price of $  .

 
 
 
 
 
 
 
The image is a graphical representation of a monopolistic competition scenario, showing a graph titled "Monopolistic Competition 1."

**Graph Details:**

- **Axes:**
  - The vertical axis represents "Price" ranging from $0.50 to $5.00.
  - The horizontal axis represents "Quantity," ranging from 0 to 400 units.

- **Curves:**
  - **Demand Curve (D):** A downward-sloping curve from the top left to the bottom right.
  - **Marginal Revenue Curve (MR):** A downward-sloping curve below the demand curve, indicating the additional revenue generated from selling an additional unit.
  - **Marginal Cost Curves (MC₁ and MC₂):** Two upward-sloping curves, labeled as MC₁ and MC₂, showcasing different cost structures at various quantities.

- **Intersection Points:**
  - The demand and the marginal cost intersect at different points, indicating the quantity and price at which the firm maximizes its profit.

- **Specific Point:**
  - A point marked (400, 2.5) suggests the price and quantity pair relevant in this context.

**Sidebar Information:**
- A score of 5 is displayed, indicating the question or scenario number.
- Additional resources such as "eBook," "Print," and "References" are available.

This graph illustrates how firms in a monopolistically competitive market set prices and output levels, balancing between demand and marginal cost to determine optimal production levels.
Transcribed Image Text:The image is a graphical representation of a monopolistic competition scenario, showing a graph titled "Monopolistic Competition 1." **Graph Details:** - **Axes:** - The vertical axis represents "Price" ranging from $0.50 to $5.00. - The horizontal axis represents "Quantity," ranging from 0 to 400 units. - **Curves:** - **Demand Curve (D):** A downward-sloping curve from the top left to the bottom right. - **Marginal Revenue Curve (MR):** A downward-sloping curve below the demand curve, indicating the additional revenue generated from selling an additional unit. - **Marginal Cost Curves (MC₁ and MC₂):** Two upward-sloping curves, labeled as MC₁ and MC₂, showcasing different cost structures at various quantities. - **Intersection Points:** - The demand and the marginal cost intersect at different points, indicating the quantity and price at which the firm maximizes its profit. - **Specific Point:** - A point marked (400, 2.5) suggests the price and quantity pair relevant in this context. **Sidebar Information:** - A score of 5 is displayed, indicating the question or scenario number. - Additional resources such as "eBook," "Print," and "References" are available. This graph illustrates how firms in a monopolistically competitive market set prices and output levels, balancing between demand and marginal cost to determine optimal production levels.
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