**Title: Market Dynamics in Monopolistically Competitive Tattoo Parlor Industry****Text:**Consider the tattoo shop market in Richmond, which operates under monopolistic competition. We examine the scenario from the viewpoint of one tattoo parlor, Roses & Thorns.Assume the market initially experiences positive economic profits. Consequently, two additional tattoo parlors enter the market. This leads to the following question:**What happens to the demand curve for Roses & Thorns tattoos?**- Shifts up- Shifts down- Stays the same**Explanation:**In a monopolistically competitive market, the entry of new firms typically increases competition, which can decrease each firm's individual market demand. This scenario helps students understand how new entrants can impact market dynamics and drive changes in demand for existing businesses.

Monopolistic competition is a form of imperfect competition. There are large number of firms. There is free entry and exit of the firms. Firms have some control over the prices. There is product differentiation.The tattoo shop market is in a monopolistically competitive market. Due to the positive economic profits there is an entry of two additional tattoo parlours. Since there is no change in the number of consumers, the demand faced by each shop decreases as the number of tattoo parlours increases. The demand curve shifts leftward from D1 to D2. The demand curve for Roses and Thorns tattoos SHIFTS DOWN. The demand curve for Roses and Thorns tattoosSHIFTS DOWN.

Business

Economics

Suppose the tattoo shop market in Richmond is monopolistically competitive. Consider the market from the perspective of one tattoo parlor, Roses & Thorns. Suppose there were positive economic profits in the market and an additional two tattoo parlors enter the market. What happens to the demand curve for Roses & Thorns tattoos shifts up shifts down stays the same

Suppose the tattoo shop market in Richmond is monopolistically competitive. Consider the market from the perspective of one tattoo parlor, Roses & Thorns. Suppose there were positive economic profits in the market and an additional two tattoo parlors enter the market. What happens to the demand curve for Roses & Thorns tattoos shifts up shifts down stays the same

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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