Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 15, Problem 3.2P
(a)
To determine
Profit maximizing output, price, total revenue, total cost and total profit of the firm.
(b)
To determine
What happens to the industry in the long run.
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Students have asked these similar questions
3.2
The following diagram shows the structure of cost and demand
facing a monopolistically competitive firm in the short run.
a. Identify the following on the graph and calculate each
one.
i. Profit-maximizing output level
ii. Profit-maximizing price
iii. Total revenue
iv. Total cost
v. Total profit or loss
b. What is likely to happen in this industry in the long
run?
ATC
20
MC
IS
14
13
10
15
20
MR
Units of output
6
(s) soa
Dollars ($)
truck kitc
3.2 The following diagram shows the structure of cost and
demand facing a monopolistically competitive firm in the
short run.
20
iv. Total cost
v. Total profit or loss
b. What is likely to happen in this industry in the long run?
15
14
13
10
6
a. Identify the following on the graph and calculate each one.
i. Profit-maximizing output level
ii. Profit-maximizing price
iii. Total revenue
0
15
20
Units of output
MC
MR
ATC
D
Part II | The graph below shows a monopolistically competitive firm in the short run.
Price and Cost
8 9
8
20
0
100
MR
200 300 400 500 600 700 800
Output
MC
9. What is the firm's profit-maximizing price and quantity?
10. How much profit does that firm make at that price and quantity?
900
ATC
-d-p
Chapter 15 Solutions
Principles of Economics (12th Edition)
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Similar questions
- Consider the diagram below depicting the revenue and cost conditions faced by a monopolistically competitive firm, and then answer the following questions. $40 $35 $30 MC ATC $25 $20 $17 A $15 $10 4.40 $5 3.25 MR Demand 3 4 5 7 8 9 10 Quantity Instructions: Round your answers to 2 decimal places. a. What is total revenue for this firm? $56.88 b. What is total cost for this firm? $ $58.88 c. What is this firm's economic profit? d. This firm is most likely In long-run ]equilibrlum because Instructions: In order to recelve full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For Incorrect answer(s). click the option twice to empty the box. ? P= ATC. ? P> MC. ? MR = MC. 2 the firm is experlencing normal profits. 2 the firm is experlencing economic profits. 7 demand exceeds marginal revenue. Price and costsarrow_forwardConsider the diagram below depicting the revenue and cost conditions faced by a monopolistically competitive firm, and then answer the following questions. $40 $35 $30 MC ATC $25 $20 $17.50 $15 $10 $4.40 $5 3.25 MR Demand 1 2 3 4 5 6 7 8 9 10 Quantity Instructions: Round your answers to 2 decimal places. a. What is total revenue for this firm? b. What is total cost for this firm? c. What is this firm's economic profit? d. This firm is most likely in (Click to select) V equilibrium because Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? MR = MC. ? the firm is experiencing economic profits. 2 the firm is experiencing normal profits. ? P> MC. ? demand exceeds marginal revenue. ? P= ATC. Price and costsarrow_forwardA. How does the demand curve faced by the firm in monopolistically competitive market differ from the demand curve faced by a firm participating in a purely competitive market? b. How does that impact how the firm sets its price and the quantity the firm produces?arrow_forward
- Westchesser Gloves is a monopolistically competitive firm that sells leather gloves. a. In the graph below, highlight the area of profit or loss. Price per pair ($) Incorrect 10 9 8 7 3 2 1 0 Average total cost 0 10 20 30 40 50 Pairs of gloves (in thousands) Westchesser's profit/loss: $ Marginal cost 80 Incorrect Demand Marginal revenue 60 70 80 90 100 b. Calculate Westchesser's profit/loss at the profit maximizing price. Profit or lossarrow_forwardPart II | The graph below shows a monopolistically competitive firm in the short run. $ 10 6 4 MC ATC 10 25 30 9. What is the firm's profit-maximizing price and quantity? 10. How much profit does that firm make at that price and quantity? 60arrow_forwardExercise A.13. Explain and graph the long-run equilibrium of a monopolistic firm and that of a perfectly competitive firm. Compare both situations in terms of the level of production, prices and economic efficiency.arrow_forward
- Draw a digram showing the effect of a new firm entering a monopolistically competitive market. Your diagram should include new and old demand, marginal revenue, profit, MC, and ATC curves.arrow_forwardRefer to text 'Monopolistic Competition in the Markets for Colas and Coffee'. on the image inserted Briefly explain any two observations regarding the differences in the price elasticities for colas and ground coffee.arrow_forward3 of 7 3. Use the graph below to answer the following questions: a. Profit maximizing output level_ b. Price charged by the monopolistic competitor_ c. Total Revenue_ d. Total Cost_ e. Variable Cost f. Fixed Cost_ g. Profit or Loss h. Number of units the firm should produce in the short run and explain why? i. Number of units the firm should produce in the long run and explain why? j. In the long run, (exit/entry)_ will cause the firm's share of the market to (increase/decrease). and the firm will (decrease/increase) advertising k. In the long run the firm's costs will (decrease/increase) will (increase/decrease) of the market 5453 4.5 4 3.5 2 40 45 50 MC MR until loss is driven to ATC and the firm's share AVC d = firm's market sharearrow_forward
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