Principles of Economics
7th Edition
ISBN: 9781305156043
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Question
Chapter 16, Problem 7PA
Subpart (a):
To determine
Change in number of firms and demand .
Subpart (b):
To determine
Profit maximizing quantity.
Subpart (c):
To determine
Profit maximizing price .
Subpart (d):
To determine
Profit maximization.
Subpart (e):
To determine
Measuring values of firms inmonopolistic competition.
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Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations:
Demand: Q=100/N-P
Marginal Revenue: MR=100/N-2Q
Total Cost: TC=50+Q2
Marginal Cost: MC=2Q
a. How does N, the number of firms in the market , affect each firms demand curve? Why?
b. How many units does each firm produce? (The answer to this and the next two questions depend on N)
c. What price does each firm charge?
d. How much profit does each firm make?
e. In the long run, how many firms will exist in this market?
Problem 2 Consider a monopolistic firm deciding how many units of a new product to sell on the market. The firm’s cost function is given by C(q) = 2q2. The inverse demand of this product is given by p = 120 − 2q, where q is the quantity and p is the price.
What would the consumer surplus and producer profit be if the firm was a price taker? Calculate the corresponding quantities and show them on a graph.
Assume the firm cannot price discriminate among its Find the monopoly quantity, price, and profit.
Calculate the deadweight
Calculate the elasticity of demand at the optimal (profit maximizing) level of production. Is the monopolistic firm operating on elastic or inelastic part of the demand?
a) Can the threat of a price war deter entry by potential competitors? What actions might a firm take to make this threat credible?
b)Why is the firm’s demand curve flatter than the total market demand curve in monopolistic competition? Suppose a monopolistically competitive firm is making a profit in the short run. What will happen to its demand curve in the long run?
Chapter 16 Solutions
Principles of Economics
Ch. 16.1 - Prob. 1QQCh. 16.2 - Prob. 2QQCh. 16.3 - Prob. 3QQCh. 16 - Prob. 1QRCh. 16 - Prob. 2QRCh. 16 - Prob. 3QRCh. 16 - Prob. 4QRCh. 16 - How might advertising reduce economic well-being?...Ch. 16 - Prob. 6QRCh. 16 - Prob. 7QR
Ch. 16 - Prob. 1QCMCCh. 16 - Prob. 2QCMCCh. 16 - Prob. 3QCMCCh. 16 - Prob. 4QCMCCh. 16 - Prob. 5QCMCCh. 16 - If advertising makes consumers more loyal to...Ch. 16 - Prob. 1PACh. 16 - Prob. 2PACh. 16 - Prob. 3PACh. 16 - Prob. 4PACh. 16 - Prob. 5PACh. 16 - Prob. 6PACh. 16 - Prob. 7PACh. 16 - Prob. 8PACh. 16 - Prob. 9PACh. 16 - Sleek Sneakers Co. is one of many firms in the...
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