Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (DD) curve, marginal revenue (MRMR) curve, marginal cost (MCMC) curve, and long-run average total cost (LRATCLRATC) curve. Assume that all firms in the industry face the same cost structure.Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. 10090Monopolistic Competition OutcomePerfect Competition OutcomeTRATCMCDMR102030405060708090100QUANTITY (Thousands of jackets)Compare the average total cost and the production level in the long-run equilibrium for a monopolistically competitive firm and a perfectly competitivefirm by completing the following table.Average Total CostProduction Levelless thanUnder...(Dollars per jacket)(Thousands of jackets)Monopolistic Competitionthe same asPerfect Competitionmore thanBecause this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium isthe long-runaverage cost it would achieve as a firm operating in a perfectly competitive market.The production level of a monopolistically competitive firm in long-run equilibrium isthe production level of a perfectly competitivefirm. This difference in output is known as theof a monopolistically competitive firm.PRICE, COSTS, AND REVENUE (Dollars per jacket)

In a perfectly competitive market there are large number of firms producing identical products thus…

Answered: Monopolistic Competition Outcome…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (DD) curve, marginal revenue (MRMR) curve, marginal cost (MCMC) curve, and long-run average total cost (LRATCLRATC) curve. Assume that all firms in the industry face the same cost structure.

Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market.

100
90
Monopolistic Competition Outcome
Perfect Competition Outcome
TRATC
MC
D
MR
10
20
30
40
50
60
70
80
90
100
QUANTITY (Thousands of jackets)
Compare the average total cost and the production level in the long-run equilibrium for a monopolistically competitive firm and a perfectly competitive
firm by completing the following table.
Average Total Cost
Production Level
less than
Under...
(Dollars per jacket)
(Thousands of jackets)
Monopolistic Competition
the same as
Perfect Competition
more than
Because this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium is
the long-run
average cost it would achieve as a firm operating in a perfectly competitive market.
The production level of a monopolistically competitive firm in long-run equilibrium is
the production level of a perfectly competitive
firm. This difference in output is known as the
of a monopolistically competitive firm.
PRICE, COSTS, AND REVENUE (Dollars per jacket)

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