MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
Question
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Chapter 14, Problem 23QE

a)

To determine

The quantity of output chosen by the firm.

b)

To determine

The average fixed cost of the monopolistic competitor.

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You 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!!!
Suppose the market for kitchen knives is monopolistically competitive and that businesses in this market are currently earning negative economic profits. In the long run, the demand for an individual kitchen knife business will   ______  as more kitchen knife businesses leave the market, which will cause economic profits to   ______ .
When 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?
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