Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 14, Problem 25QE
To determine
The difference between a perfect competitor and monopolistic competitor in the long run.
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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 ______ .
You are the manager of a monopolistically competitive firm, and your demand and cost functions
are estimated as Q = 25 - P and C = Q² +2Q + 2. What is the firm's maximum profit?
Suppose the figure to the right represents the market for a particular brand
of shampoo, such as L'Oreal, Lancome, or Maybelline.
Assume the market is monopolistically competitive and is in long-run
equilibrium.
How much excess capacity does the firm have?
The monopolistically competitive firm's excess capacity is thousand bottles
of shampoo. (Enter your response as an integer.)
C
Price and cost (per bottle)
2.00-
Q
1.80-
MC
Q
ATC
1.60-
1.40-
1.20-
1.00-
0.80-
0.60-
0.40-
0.20-
0.00+
0
2
MR
D
4 6 8 10 12 14 16 18 20
Quantity (shampoo bottles in thousands)
Chapter 14 Solutions
Microeconomics
Ch. 14.1 - Prob. 1QCh. 14.1 - Prob. 2QCh. 14.1 - Prob. 3QCh. 14.1 - Prob. 4QCh. 14.1 - Prob. 5QCh. 14.1 - Prob. 6QCh. 14.1 - Prob. 7QCh. 14.1 - Prob. 8QCh. 14.1 - Prob. 9QCh. 14.1 - Prob. 10Q
Ch. 14.A - Prob. 1QECh. 14.A - Prob. 2QECh. 14.A - Prob. 3QECh. 14.A - Prob. 4QECh. 14 - Prob. 1QECh. 14 - Prob. 2QECh. 14 - Prob. 3QECh. 14 - Prob. 4QECh. 14 - Prob. 5QECh. 14 - Prob. 6QECh. 14 - Prob. 7QECh. 14 - Prob. 8QECh. 14 - Prob. 9QECh. 14 - Prob. 10QECh. 14 - Prob. 11QECh. 14 - Prob. 12QECh. 14 - Prob. 13QECh. 14 - Prob. 14QECh. 14 - Prob. 15QECh. 14 - Prob. 16QECh. 14 - Prob. 17QECh. 14 - Prob. 18QECh. 14 - Prob. 19QECh. 14 - Prob. 20QECh. 14 - Prob. 21QECh. 14 - Prob. 22QECh. 14 - Prob. 23QECh. 14 - Prob. 24QECh. 14 - Prob. 25QECh. 14 - Prob. 1QAPCh. 14 - Prob. 2QAPCh. 14 - Prob. 3QAPCh. 14 - Prob. 4QAPCh. 14 - Prob. 5QAPCh. 14 - Prob. 6QAPCh. 14 - Prob. 7QAPCh. 14 - Prob. 1IPCh. 14 - Prob. 2IPCh. 14 - Prob. 3IPCh. 14 - Prob. 4IPCh. 14 - Prob. 5IPCh. 14 - Prob. 6IPCh. 14 - Prob. 7IPCh. 14 - Prob. 8IPCh. 14 - Prob. 9IP
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Similar questions
- If you have a graph showing a monopolistic competitive situation in which demand shifts to the left in the long run but your graph only shows the MR curve in the short run, how do you figure out where the long-run MR line should go on the graph? (I have 2 demand curves (sr and lr), but only 1 MR curve (sr). I think it would be to the left of MR sr, but don't know how to draw it. One would need to know this to figure out excess capacity and markup, right?arrow_forwardSuppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve: Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm, Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.arrow_forwardSuppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 100 90 80 Mon Comp Outcome 70 Min Unit Cost 50 ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bats) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that ▼ at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is the efficient scale. PRICE (Dollars per bat)arrow_forward
- PRICE (Dollars per shirt) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 ATC True Demand MR + 20 30 40 50 60 70 80 QUANTITY (Thousands of shirts) O False 90 100 + Mon Comp Outcome Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium is average total cost. at the the quantity at which firms minimize True or False: In long-run equilibrium, a monopolistically competitive firm charges a price that is above marginal cost.arrow_forwardSuppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost PRICE (Dollars per shirt) 0 10 20 True O False MR Demand 60 QUANTITY (Thousands of shirts) ATC 40 BO 190 100 Mon Comp Outcorne Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is Min Unit Cost True or False: This indicates that there is a markup on marginal cost in the market for shirts. at the the efficient scale.arrow_forwardSuppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.arrow_forward
- Suppose that a company operates in the monopolistically competitive market for denim jackets. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. ? 100 PRICE (Dollars per jacket) 8 20 60 50 X ATC 20 MC MR 2 2 2 2 10 0 0 30 40 50 60 70 QUANTITY (Thousands of jackets) 10 20 80 Demand 90 100 Mon Comp Outcome Min Unit Costarrow_forwardSuppose that a company operates in the monopolistically competitive market for denim jackets. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. ? PRICE (Dollars per jacket) 100 90 80 70 60 40 30 20 MC 10 ATC MR Demand 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) + Mon Comp Outcome Min Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that. firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is at the optimal quantity for each the minimum average total cost.arrow_forwardAssume the figure on the right shows the cost structure for a monopolistically competitive firm selling a particular brand of shoes. MC is the marginal cost curve and AC is the average cost curve. If this firm produces 2 thousand pairs of shoes, does it minimize average cost? How much more would they need to produce to reach minimum average cost? The firm needs to produce an additional thousand pairs of shoes to reach minimum average cost. (Enter your response as an integer.) SEED Price (dollars per pair) 80- 72- 64- 56- 48- 40- 32- 24- 16- 8- 0- 0 1 Quantity (in thousands) MC AG 10 Q 20arrow_forward
- Suppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dollars per engine) 100 90 80 70 60 50 40 30 20 10 MC 0 0 10 O True ATC Demand False MR 20 30 40 50 60 70 80 QUANTITY (Thousands of engines) 90 100 Mon Comp Outcome Min Unit Cost True or False: This indicates that there is excess capacity in the market for engines. Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium…arrow_forwardSuppose that a firm produces wooden train engines in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. ? PRICE (Dollars per engine) 100 90 80 70 60 50 40 30 20 10 0 0 II MC + 10 Ⓒ True O False MR ATC I Demand I 20 30 40 50 60 70 QUANTITY (Thousands of engines) 80 90 100 Mon Comp Outcome Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that P = ATC at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is less than the efficient scale. Min Unit Cost True or…arrow_forwardfor a monopolistic firm, its demands is p=200- 0.25Q while MR =200-0.5Q if its MC=20 how much it should produce to maximize its profit? for a monopolistic firm, its demands is p=200- 0.25Q while MR =200-0.5Q if its MC=20 how much the firm should charge? for a monopolistic firm, its demands is p=200- 0.25Q while MR =200-0.5Q if its MC=20 calculate its maximizing profitarrow_forward
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