Which of the following statements are true about BOTH monopolistic competition AND monopolies? Check all that apply a) price is above marginal cost b) firms can earn positive profit in the long run c) firms earn zero profit in the long run d) firms are not price takers
Which of the following statements are true about BOTH monopolistic competition AND monopolies? Check all that apply a) price is above marginal cost b) firms can earn positive profit in the long run c) firms earn zero profit in the long run d) firms are not price takers
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
3rd question
Which of the following statements are true about BOTH
a)
b) firms can earn positive profit in the long run
c) firms earn zero profit in the long run
d) firms are not price takers
Transcribed Image Text:M
00
CO
LL
50
50
PRICE (Dollars per bike)
3. 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 curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
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.
450
Monopolistically Competitive Outcome
350
Profit or Loss
ATC
250
150
MC
MR
Demand
0.
150
250
000
QUANTITY (Bikes)
450
Given the profit-maximizing choice of output and price, the shop is making
profit, which means there are
shons in the industr relative to the Jong-run equilihrium
MacBook Pro
*SAFAT
ACID
四
&
#3
24
3.
4.
5.
M
R.
J
S
K.
B.
Transcribed Image Text:PRICE (Dollars per bike)
< CO
Given the profit-maximizing choice of output and price, the shop is making
profit, which means there are
shops in the industry relative to the long-run equilibrium.
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.
Demand
Demand
QUANTITY (Bikes)
Which of the following statements are true about both monopolistic competition and monopolies? Check all that apply.
MacBook Pro
ATAT
ACIDEAL
田
23
24
5.
8.
M
B.
W N 8 A
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education