I only need answers for the highlighted sections please :) The diagram provided illustrates the demand and cost situation of a firm operating within a monopolistically competitive market. **Graph Explanation:**- The vertical axis represents the price and cost per unit ($).- The horizontal axis represents the output quantity.- There are several curves displayed: - **Demand (D)** curve: Downward sloping, indicating higher prices at lower quantities. - **Marginal Revenue (MR)** curve: Below the demand curve and slopes downward, reflecting the additional revenue from selling one more unit. - **Marginal Cost (MC)** curve: Upward sloping, indicating increasing costs with higher output. - **Average Total Cost (ATC)** curve: U-shaped, representing the average cost per unit at different output levels.**Questions and Annotations:****a. What output will this firm choose? Why?**- The firm will choose the output level where Marginal Cost (MC) equals Marginal Revenue (MR) because this is where profit maximization occurs. According to the graph, this is at the intercept of the MC and MR curves.**b. What price will it charge? Why?**- The price is determined by the point on the Demand (D) curve directly above the chosen output level where MC equals MR. This is because the demand curve indicates what consumers are willing to pay at each quantity level.**c. What is total revenue and total cost at the profit-maximizing output?**- Total Revenue (TR) is calculated by multiplying the price at the profit-maximizing output by the quantity produced.- Total Cost (TC) is found by multiplying the average total cost at that output level by the same quantity.**d. What is its per unit profit? What is its total profit?**- Per unit profit is the difference between the price charged (from the demand curve) and the average total cost (ATC) at the profit-maximizing output.- Total profit is calculated by multiplying the per unit profit by the total quantity produced.**e. Is this a long-run equilibrium situation? Why or why not?**- In a long-run equilibrium in monopolistic competition, firms make zero economic profit, meaning the price equals the average total cost. The situation depicted must be analyzed to determine if the price equals ATC at the profit-maximizing quantity, which would indicate long-term equilibrium. If not, adjustments would occur through market entry or exit.

In a monopolistic competitive firm there are large number of firms selling similar products thus…

competitive industry. 14 II MC 12 11 II:: e 10 20 3 O 0 70 0 0 100 110 120 130 t40 150 160 170e 100 a. What output will this firm choose? Why? b. What price will it charge? Why? c. What is total revenue and total cost at the profit maximizing output? d. What is its per unit profit? What is its total profit? Te thie a long nun couilibrium situation? Why or why not? I dna

competitive industry. 14 II MC 12 11 II:: e 10 20 3 O 0 70 0 0 100 110 120 130 t40 150 160 170e 100 a. What output will this firm choose? Why? b. What price will it charge? Why? c. What is total revenue and total cost at the profit maximizing output? d. What is its per unit profit? What is its total profit? Te thie a long nun couilibrium situation? Why or why not? I dna

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

I only need answers for the highlighted sections please :)

The diagram provided illustrates the demand and cost situation of a firm operating within a monopolistically competitive market.

**Graph Explanation:**
- The vertical axis represents the price and cost per unit ($).
- The horizontal axis represents the output quantity.
- There are several curves displayed:
- **Demand (D)** curve: Downward sloping, indicating higher prices at lower quantities.
- **Marginal Revenue (MR)** curve: Below the demand curve and slopes downward, reflecting the additional revenue from selling one more unit.
- **Marginal Cost (MC)** curve: Upward sloping, indicating increasing costs with higher output.
- **Average Total Cost (ATC)** curve: U-shaped, representing the average cost per unit at different output levels.

**Questions and Annotations:**

**a. What output will this firm choose? Why?**
- The firm will choose the output level where Marginal Cost (MC) equals Marginal Revenue (MR) because this is where profit maximization occurs. According to the graph, this is at the intercept of the MC and MR curves.

**b. What price will it charge? Why?**
- The price is determined by the point on the Demand (D) curve directly above the chosen output level where MC equals MR. This is because the demand curve indicates what consumers are willing to pay at each quantity level.

**c. What is total revenue and total cost at the profit-maximizing output?**
- Total Revenue (TR) is calculated by multiplying the price at the profit-maximizing output by the quantity produced.
- Total Cost (TC) is found by multiplying the average total cost at that output level by the same quantity.

**d. What is its per unit profit? What is its total profit?**
- Per unit profit is the difference between the price charged (from the demand curve) and the average total cost (ATC) at the profit-maximizing output.
- Total profit is calculated by multiplying the per unit profit by the total quantity produced.

**e. Is this a long-run equilibrium situation? Why or why not?**
- In a long-run equilibrium in monopolistic competition, firms make zero economic profit, meaning the price equals the average total cost. The situation depicted must be analyzed to determine if the price equals ATC at the profit-maximizing quantity, which would indicate long-term equilibrium. If not, adjustments would occur through market entry or exit.

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