Profit earned by a typical monopolist and monopolistic firm in the long and short. Concept Introduction: Monopolistic Competition An imperfect market competition where there are large numbers of sellers selling differentiated product and is called the monopolistic competition. It exhibits the elements of both a monopoly and perfect competition . The defining characteristics of the market are- It has a large number of firms, relative free entry and exit of firms, product differentiation, imperfect information, transportation costs, inelastic demand and inefficient production. Monopolist- A market with a single seller and its identity is well protected by significant restrictions on entry of new firms into the production of the unique product are characterized as a monopoly. The monopolist is the sole seller in the market and enjoys the power of being the price setter. Normal and Supernormal profit An entrepreneur is a factor of production whose profit is his income. This incentive keeps him in business. It is an integral part of the cost structure of the firm and is aggregated with rent, wages, interest and other explicit expenses to define the cost of production. Any profit over and above this implicit cost paid as remuneration to the producer, is the supernormal profit.

Question

Want to see the full answer?

Answer 1

Question

Chapter 15, Problem 7P

To determine

Profit earned by a typical monopolist and monopolistic firm in the long and short.

Concept Introduction:

Monopolistic Competition An imperfect market competition where there are large numbers of sellers selling differentiated product and is called the monopolistic competition. It exhibits the elements of both a monopoly and perfect competition. The defining characteristics of the market are- It has a large number of firms, relative free entry and exit of firms, product differentiation, imperfect information, transportation costs, inelastic demand and inefficient production.

Monopolist- A market with a single seller and its identity is well protected by significant restrictions on entry of new firms into the production of the unique product are characterized as a monopoly. The monopolist is the sole seller in the market and enjoys the power of being the price setter.

Normal and Supernormal profit An entrepreneur is a factor of production whose profit is his income. This incentive keeps him in business. It is an integral part of the cost structure of the firm and is aggregated with rent, wages, interest and other explicit expenses to define the cost of production. Any profit over and above this implicit cost paid as remuneration to the producer, is the supernormal profit.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Suppose Person A is looking for a health insurance plan on Oregon's health insurance marketplace and they find one with the following details: Monthly Premium: $331 Deductible: $5,000 Primary care visit to treat injury or illness: $35 copay Imaging (CT/PET Scans MRIs): 40% coinsurance after deductible Ambulance: 40% coinsurance after deductible Inpatient hospital stay: 40% coinsurance after deductible Suppose further that Person A purchases this plan and it takes effect in January 2022. The cost Person A pays per month for this health insurance is equal to _. Person A must pay. before coinsurance kicks in. 0000 $35; $5,000 $35; $331 $331; $5,000 $331; $35 Multiple Choice 1 point Suppose Person A is looking for a health insurance plan on Oregon's health insurance marketplace and you find one with the following details: Monthly Premium: $331 Deductible: $5,000 Primary care visit to treat injury or illness: $35 copay Imaging (CT/PET Scans MRIs): 40% coinsurance after deductible Ambulance:…

Use the figure below to answer the following question. Point X and Y represent two non-ideal contracts that the individual is faced with buying. From this information, you can conclude that if given the option between points B and Y the individual would prefer: Utility A у в 0000 UKI) E[Bp IH point B- the actuarially fair and full contract point Y-the actuarially unfair but full contract point Y- the actuarially fair, but partial contract point B- the actuarially fair, but partial contract income

2. Another issue facing millennials is the growing income and wealth inequality. We will use our model to understand the implications of this issue. A. Begin from the baseline preferences and endowments. Assume Xavier is wealthier than Yuri. Xavier has an endowment of 1100 pounds for each period (E1=E2=1100). Yuri has an endowment of only 900 pounds in each period (E1=E2=900). Note that each period's market supply is unchanged (1100 + 900 = 1000 + 1000 = = 2000). Determine the equilibrium interest rate. r = % B. Begin from the baseline preferences and endowments. Assume Yuri is wealthier than Xavier. Xavier has an endowment of only 900 pounds in each period (E1=E2=900). Yuri has an endowment of 1100 pounds for each period (E1=E2=1100). Note that each period's market supply is unchanged (1100 + 900 = 1000 + 1000 = 2000). Determine the equilibrium interest rate. r = % C. Begin from the baseline preferences and endowments. A third person named Zena joins our economy. Zena is very…