Suppose that a firm engages in Monopolistic Competition. Suppose that these firms all start inLong-Run Equilibrium.7. Draw figure with the firm's (i) MC, (ii) LRAC, (iii) MR, and (iv) Demand, that shows this firm'sLong-Run Equilibrium. Show what price they produce at. Show what quantity they produce.What profits do they make? [2 points]Suppose that there is a decrease for the Demand for the product in this market.8. What would happen to the market price, quantity, and profits for an individual firm in theShort-Run? Explain your answer using a figure similar to the one you drew in Q7. [3 points]9. What would happen to the market price, quantity, profits, and the number of firms in thismarket in the Long-Run? Explain your answer using a figure similar to the one you drew inQ7. [3 points]

Here are the visual representations for the scenarios:Q7: Long-Run EquilibriumThe demand curve is…

Answered: Suppose that a firm engages in…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Monopolistic Competition

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

(12) Suppose all firms in a monopolistically competitive industry were merged into one large firm. Would that new firm produce as many different brands? Would it produce only a single brand? Explain.
4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. 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 kit) 100 90 80 70 60 50 40 30 20 10 0 0 MC 10 True ATC False MR 20 30 40 50 60 70 QUANTITY (Thousands of kits) 80 Demand 90 100 Mon Comp Outcome Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that for each firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is cost. Min Unit Cost True or False: This…
4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. 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 kit) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 20 ATC MR Demand 30 40 50 60 70 QUANTITY (Thousands of kits) 80 90 100 + Mon Comp Outcome Min Unit Cost
4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for rugby kits. 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. → Show Transcribed Text 100 90 80 70 8 PRICE (Dollars per kit) 50 40 30 20 10 0 0 MC 10 ATC 3 c MR 20 30 40 50 60 70 80 QUANTITY (Thousands of kits) Demand 90 100 Mon Comp Outcome Min Unit Cost
1
PRICE (Dolars per bike) 2. How short-run profit or losses induce entry or exit Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal-revenue (MR) curve, marginal-cost (MC) curve, and average-total-cost (ATC) curve. Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss. Now consider the long run in which bike manufacturers are free to enter and exit the market. Show the possible effect of this free entry and exit by shifting the demand curve for a typical individual producer of bikes on the following graph. 500 400 400 ATC 300 250 200 150 100 Mo Demand 0 ° 50 100 150 200 200 300 350 450 500 QUANTITY (Bikes) Monopolistically Competitive Outcome Profit or Loss Given the…
7. The figure shows the monopolistically competitive market for smartphones. Plot the profit-maximizing price and quantity on the graph. Is this producer earning positive or negative profits in the short run? In the long run, will supply or demand for this producer's good be affected? Will economic profits increase or decrease for this producer?
ICE (Dollars per scooter) 3. How short-run profit or losses induce entry or exit Citrus Scooters is a company that manufactures electric scooters in a monopolistically competitive market. The following graph shows the demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC) for Citrus. Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss 500 450 400 360 200 250 200 150 400 50 MC- ATC MR Demand 150 200 250 300 360 400 450 500 QUANTITY (Scooters) + Monopolistically Competitive Outcome Profit or Loss (?) Given the profit-maximizing choice of output and price, Citrus Scooters is earning sellers in the industry relative to the long-run equilibrium amount. Now consider the long run in which scooter manufacturers are free to enter and…
Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that at the optimal quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is the efficient scale. True or False: This indicates that there is excess capacity in the market for jackets. O True False 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 much entry of new firms in the market.
4. Is monopolistic competition efficient? Suppose that a company operates in the monopolistically competitive market for denim jackets. 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. PRCE (Dollars per jacket) 2882332RR 100 90 60 50 20 0 Mto 10 10 ATC MR 20 30 40 50 00 70 QUANTITY (Thousands of jackets) Demand 80 90 100 Mon Comp Outcome Min Unit Cost
3. Is monopolistic competition efficient? Suppose that a firm produces tennis racquets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average cost (AC) 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. Note: Dashed drop lines will automatically extend to both axes. 100 8 PRICE, COSTS, AND REVENUE (Dollars per racquet) 80 70 R 40 30 20 10 C D D 10 Under... MR 30 40 50 70 QUANTITY (Thousands of racquets) Monopolistic Competition Perfect Competition D Average Cost (Dollars per racquet) 60 55 90 Compare the average cost and the production level in the…
None

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Microeconomics

Economics

ISBN:

9781305156050

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Microeconomics (MindTap Course List)

Economics

ISBN:

9781305971493

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Microeconomics

Economics

ISBN:

9781305156050

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Microeconomics (MindTap Course List)

Economics

ISBN:

9781305971493

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Economics, 7th Edition (MindTap Cou…

Economics

ISBN:

9781285165875

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS