Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve,marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.PRICE (Dollars per razor)100908706050403020100DMO10ATCMR20 30 40 50 60 70QUANTITY (Thousands of razors)60Demand90100Mon Comp OutcomeMin Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact thatfirm. Further, the quantity the firm produces in long-run equilibrium isthe efficient scale.True or False: This indicates that there is a markup on marginal cost in the market for razors.O TrueO Falseat the optimal quantity for eachMonopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of theexternality implies that there is too little entry of new firms in the market.

A monopolistic competitive firm optimal output occurs at the intersection of MR and MC (i.e., at MR…

Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.

Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.

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

Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve,
marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm.
Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,
place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.
PRICE (Dollars per razor)
100
90
8
70
60
50
40
30
20
10
0
D
MO
10
ATC
MR
20 30 40 50 60 70
QUANTITY (Thousands of razors)
60
Demand
90
100
Mon Comp Outcome
Min Unit Cost

Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that
firm. Further, the quantity the firm produces in long-run equilibrium is
the efficient scale.
True or False: This indicates that there is a markup on marginal cost in the market for razors.
O True
O False
at the optimal quantity for each
Monopolistically competitive markets may be socially inefficient due to the presence of too many or too few firms. The presence of the
externality implies that there is too little entry of new firms in the market.

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