The figure on the right shows a firm operating in a monopolistically competitive market. To maximize profit, the firm produces OA. 120 units in order to minimize cost. OB. 80 units sold at $40 per unit and makes an economic profit of $60 per unit. OC. 80 units sold at $80 per unit and incurs an economic loss of $20 per unit. OD. 100 units sold at $60 per unit. OE. 80 units sold at $40 per unit and incurs an economic loss of $60 per unit. Price and cost (dollars per unit) 120 100 80 60 40 20 0 60 80 MR 100 MC ATC D 120 140 Quantity (units)

The figure on the right shows a firm operating in a monopolistically competitive market. To maximize profit, the firm produces OA. 120 units in order to minimize cost. OB. 80 units sold at $40 per unit and makes an economic profit of $60 per unit. OC. 80 units sold at $80 per unit and incurs an economic loss of $20 per unit. OD. 100 units sold at $60 per unit. OE. 80 units sold at $40 per unit and incurs an economic loss of $60 per unit. Price and cost (dollars per unit) 120 100 80 60 40 20 0 60 80 MR 100 MC ATC D 120 140 Quantity (units)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the long run, monopolistically competitive firms produce a level of output such that:
Suppose a monopolistically competitive firm has a marginal cost of $2 and a marginal revenue of $8. The price of the product exceeds ATC. The monopolistically competitive firm should _____ its output and ______its price. Question 8 options: a) decrease; increase b) increase; increase c) increase; lower d) decrease; decrease
A monopolistically competitive firm is operating in the short run at the optimal level of output and is earning negative economic profits. Which of the following must be true? Select one: a. ATC> P> MR = MC. b. ATC= P> MR = MC. c. ATC> P = MR = MC. d. ATC> P> MR > MC.
Microlith, Inc. operates in a monopolistically competitive market. Using an appropriate diagram, explain why this firm will set P > MC, but will still earn zero economic profit in the long run.
Suppose that a monopolistically competitive restaurant is currently serving 250 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Instructions: Enter your answers as a whole number. a. What is this firm's profit or loss? $ b. Will there be entry or exit? (Click to select) Will this restaurant's demand curve shift left or right? (Click to select) In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Suppose that the allocatively efficient output level in long-run equilibrium is 210 meals. c. What is the firm's profit? $ d. Is this firm's deadweight loss greater than or less than $90? (Click to select)
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33 and 60
The market for Banh Mi in Auckland CBD consists of 6 restaurants operating in monopolistic competition. Suppose that these firms face monthly fixed costs of $5,000 and marginal costs of $3. a) Draw the average cost and marginal cost curves for a representative firm. b) If the short run market price is $6 and each firm sells 2000 units per month, what will occur in the long run? Explain and show on a graph. c) Suppose that Banh Mi become more popular as a lunch option, and market demand increases. Explain the short run and long run effects on the market, including price, firm-level quantity and number of firms. Use graphs to explain your answer.
33 $100 $90 MC АТС $80 E of $70 $60 $50 $40 $30 Demand = P $20 $10 MR $0 10 20 30 40 50 60 Output (Q) The firm shown in the diagram above is in long run equilibrium in a monopolistically competitive market. According to the graph, the Markup is Select one: а. $40 b. $60 с. $50 d. $30