Grotesque Bikes is a company that manufactures bikes in a monopolistically competitive market. Assume that Grotesque is operating in the short run. The following graph shows Grotesque's annual demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the grey point (star symbol) on the graph to indicate the profit-maximizing price and quantity for the company. Then determine if the company is experiencing a profit or a loss. If they are experiencing a profit, use the green rectangle (triangle symbols) to shade the area representing the company's profit. However, if they are suffering from a loss, use the purple rectangle (diamond symbols) to shade the area representing the company's loss. Note: Select and drag the rectangles from the palette to the graph. To resize, select one of the points on the rectangle and move to the desired position. PRICE (Dollars per bike) 100 90 80 70 60 ATC 50 40 30 20 MC 10 Mon Comp Outcome Profit Loss Demand MR 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bikes) Now consider the long run, in which bike manufacturers are free to enter and exit the market. (?) PRICE (Dollars per bike) 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bikes) Now consider the long run, in which bike manufacturers are free to enter and exit the market. Show the possible effect of this free entry and exit by shifting the demand curve for a typical individual producer of bikes on the following graph. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. QUANTITY (Bikes) Demand Demand ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Grotesque Bikes is a company that manufactures bikes in a monopolistically competitive market. Assume that Grotesque is operating in the short run. The following graph shows Grotesque's annual demand curve (Demand), marginal revenue curve (MR ), marginal cost curve (MC ), and average total cost curve (ATC ). Place the grey point (star symbol) on the graph to indicate the profit-maximizing price and quantity for the company. Then determine if the company is experiencing a profit or a loss. If they are experiencing a profit, use the green rectangle (triangle symbols) to shade the area representing the company's profit. However, if they are suffering from a loss, use the purple rectangle (diamond symbols) to shade the area representing the company’s loss. Note: Select and drag the rectangles from the palette to the graph. To resize, select one of the points on the rectangle and move to the desired position. Now consider the long run, in which bike manufacturers are free to enter and exit the market. Show the possible effect of this free entry and exit by shifting the demand curve for a typical individual producer of bikes on the following graph. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.