Answered: MC АТС Quantity Dollars per unit

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

(Monopolistic Competition and Perfect Competition Compared)
Illustrated below are the marginal cost and average
total cost curves for a small firm that is in long-run
equilibrium.
a. Locate the long-run equilibrium price and quantity if
the firm is perfectly competitive.
b. Label the price and quantity p1 and q1.
c. Draw in a demand and marginal revenue curve to illustrate
long-run equilibrium if the firm is monopolistically
competitive. Label the price and quantity p2 and q2 .
d. How do the monopolistically competitive firm’s price
and output compare to those of the perfectly competitive
firm?
e. How do long-run profits compare for the two types of
firms?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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