Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete. Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct.
Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete. Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under
Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that,
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(a) The numbers of firms operating in this market will not change.
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(b) At equilibrium the profit of firms will increase.
-
(c) The quantity of types of dolls available to consumers will increase.
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(d) All the above answers are correct.
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