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In the long-run equilibrium of a monopolistically competitive industry, the zero-profit point is to the left of minimum average cost. EXPLAIN. WHY? Explanation with graph:

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 15CTQ: Make a case for why monopolistically competitive industries never reach long-run equilibrium.

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Question

1. In the long-run equilibrium of a monopolistically competitive industry, the zero-profit point is to the left
of minimum average cost. EXPLAIN. WHY? Explanation with graph:

Definition Definition Form of market structure in which there are a large number of sellers of a particular product, with each seller selling somewhat differentiated but close substitutes to the product sold by other sellers. Features of monopolistic competition include: Large number of buyers and sellers Differentiated products Free entry and exit of the firms in the market

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QUESTION 7 The graph below summarizes the demand and costs for a firm that operates under a monopolistically competitive market. Instruction: Use the nearest whole numbers on the graph when calculating numerical responses below. $ 220 MC 200 - 180 - 160 - ATC 140 - 120- 100 - 80 - 60 40 - 20- MR 2 4 8 10 12 14 16 18 20 22 24 26 Quantity a. What level of output should this firm produce in the short run? units. b. What price should this firm charge in the short run?P = $ c. What is the firm's total cost at this level of output? TC = d. What is the firm's profit if it produces this level of output? Profits = $ g. What adjustments should the manager be anticipating? (А, В, С, or D). A. Demand will remain unchanged over time. B. Demand will decrease over time as new firms enter the market. C. Demand will increase over time as firms exit the market. D. Demand will increase over time a new firms enter the market.
Mm.44. Subject:- Economy
1. Consider a monopolistically competitive market of hair salon. Glamour Hair Salon is one of the many firms in the market best known for their hair spa service. They have been running the business for 30 years already. With this, imagine its long run equilibrium. a. Illustrate using a graph the demand curve of Glamour Hair Salon's hair spa service. Using the same graph, draw its marginal-revenue curve, average-total-cost curve, and marginal-cost curve. Label its profit-maximizing output and price.. b. Determine the Glamour Hair Salon's profit in hair spa. Briefly describe it.. c. Using the same graph you made in Letter a, indicate the consumer surplus generated of the clients the Salon. Similarly, indicate the deadweight loss relative to the efficient level of their hair spa service..
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