Consider the following graph of a monopolistically competitive firm: 50 45 40 35 ↑ Price 20 15- 10- MC ATC MR 10 20 30 40 50 60 70 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)?

Consider the following graph of a monopolistically competitive firm: 50 45 40 35 ↑ Price 20 15- 10- MC ATC MR 10 20 30 40 50 60 70 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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