EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 12, Problem 4QR
To determine
Short-run and long-run monopolistically competitive firm.
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Students have asked these similar questions
Draw a diagram that depicts the profit maximization of a perfectly competitive and monopolistic market.
Monopolistic competition creates inefficiency because of the
Price
markups and excess capacity. The graph depicts the situation
$100
for a hypothetical monopolistically competitive firm. The
90
curves included in the graph are demand (D), marginal
80
revenue (MR), average total cost (ATC), and marginal cost
ATC
(MC). Use the graph to find the requested values.
70
60
What is the size of the markup on the price?
50
40
markup: $
30
What is the size of the excess capacity?
20
MC
MR
10
units
excess capacity:
20
30
40
50
60
70
80
90
10
100
Quantity
The graph shows the demand curve, marginal revenue curve, and marginal cost curve of Big Splash, Inc., a producer of
wading pools in monopolistic competition.
Draw a point at the firm's profit-maximizing price and quantity.
Draw a vertical arrow that shows the firm's markup.
Draw a shape that shows the firm's economic profit.
Big Splash's markup is $ a pool.
Big Splash's excess capacity is
Big Splash's economic profit is $
360
340-
320
300-
280-
260-
240-
220-
200-
180-
160-
140-
120-
100-
80-
60-
40+
Price and cost (dollars per pool)
0 10
MC
20
ATC
D
MR
30 40 50 60 70 80
Quantity (pools per week)
>>> Draw only the objects specified in the question.
Q
Q
Chapter 12 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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Similar questions
- Suppose the accompanying graph depicts a monopolistically competitive firm earning positive economic profits. Please shift the curves to show the effects of long-run competition and then place Point A at the price and quantity at which the firm will produce in the long-run.arrow_forwardImagine a scenario in which the fashion industry is suffering from monopolistic price gouging and a dwindling demandarrow_forwardSuppose that, due to a successful advertising campaign, a monopolistic competitor experiences an increase in demand for its product. How will that affect the price it charges and the quantity it supplies? Show on a graph.arrow_forward
- The following graph represents a monopolistically competitive firm in long-run equilibrium. Place the black point (cross sign) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Next, place the grey star on the graph to indicate the point where the LRAC reaches a minimum. PRICE PER UNIT (Dollars) 500 450 400 350 300 250 200 150 100 50 MC 0 0 50 LRAC MR Demand 100 150 200 250 300 350 400 450 500 QUANTITY (Units) Monopolistically Competitive Outcome Minimum of the LRAC The long-run equilibrium price is $ (Hint: Use the graph to find the numeric value of the price at equilibrium.) The long-run equilibrium quantity is units. The LRAC curve is at its minimum at a quantity of The long-run equilibrium price is units. the marginal cost of producing the equilibrium output. ?arrow_forwardGive an example of a market that has monopolistic competition and explain how the example you have chosen exhibits competitive aspects and how it also exhibits monopolistic aspects.arrow_forwardWhat factors hinder firms in monopolistic competition from earning economic profits in the long run?arrow_forward
- Economicsarrow_forwardDoes the monopolistic firm make a profit, loss, or zero economic profit in the long run?arrow_forwardSuppose 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_forward
- find the graphs for a Monopolistic Competition firm. graphs: Find the graph for short run economic loss for the firm. Find the graph for short run economic profit for the firm. Find the graph for long run – normal profit for the firm. Make sure the graphs show the area of economic profit or loss.arrow_forwardIn the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a grapharrow_forwardWhy is a competitive market generally better for society than a monopolistic market?arrow_forward
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