Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
13th Edition
ISBN: 9781337742535
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 11, Problem 4QP
To determine
Explain the long-run profit in the
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If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Monopolistically competitive firms could increase the quantity they produce and potentially lower the average total cost of production. Why don't they do so?
Explain how a price taker firm could use
monopolistic competition to become a price
searcher.
Chapter 11 Solutions
Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
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- How do the results of a competitive industry compare with that of a monopolistic industry?arrow_forwardWhat factors hinder firms in monopolistic competition from earning economic profits in the long run?arrow_forwardWhen oil prices increased 10 fold during the 1973 – 80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy?arrow_forward
- Suppose you manage a local grocery store, and you learn that a very popular national grocery chain is about to open a store just a few miles away. Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). What will happen to your profits? Explain your reasoning in detail. How and why do profits change? What could you do to defend your market share against the new store?arrow_forwardWhy is a competitive market generally better for society than a monopolistic market?arrow_forwardDraw the demand, MR, ATC, and MC curves for a monopolistically competitive firm earning economic profit in the short-run (be sure to draw the ATC below the point where MR and MC cross. Complete the 4 steps on your graph to show the amount of profit the firm is earning. You can make up numbers if it makes it easier for you.arrow_forward
- Which of these is monopolistically competitive?arrow_forwardAnswer the question: Aside from advertising, how can monopolistically competitive firms increase demand for their products? What effect would doing this have on the elasticity of the firm’s perceived demand curve? Explain your answers.arrow_forwardWhat makes a Monopolistic Competition a Perfect Competition.arrow_forward
- What gives firms market power in an industry characterized by Monopolistic Competition?arrow_forwardImagine a scenario in which the fashion industry is suffering from monopolistic price gouging and a dwindling demandarrow_forwardYou are a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. P = MC, P > ATCP > MC, P = ATC Illustrating with graph(s), can the firm possibly be maximising profit? If not, what should it do to increase profit? If the firm is profit-maximising, is the firm in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? PLZ EXLAIN MORE DETAILS AND WRITE IT CLEARLY THX!!!arrow_forward
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