Problem 4 (Monopolistic Competition) Price and costs (dollars per unit) A 3 2 1 0 10 20 MR MC ATC 30 40 50 60 Quantity (units per day) The figure above shows the demand, marginal revenue, and cost curves for a firm under monopolistic competition in the short run. Assume the firm's total fixed cost is 30 dollars per day. Question a: Compute the firm's economic profit/loss in the short run. Question b: Explain what will happen in the long run and show the changes in the graph.

Problem 4 (Monopolistic Competition) Price and costs (dollars per unit) A 3 2 1 0 10 20 MR MC ATC 30 40 50 60 Quantity (units per day) The figure above shows the demand, marginal revenue, and cost curves for a firm under monopolistic competition in the short run. Assume the firm's total fixed cost is 30 dollars per day. Question a: Compute the firm's economic profit/loss in the short run. Question b: Explain what will happen in the long run and show the changes in the graph.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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