Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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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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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?
Assume 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
20
Chapter 16 Solutions
Principles of Microeconomics
Ch. 16.1 - Prob. 1QQCh. 16.2 - Prob. 2QQCh. 16.3 - Prob. 3QQCh. 16 - Prob. 1CQQCh. 16 - Prob. 2CQQCh. 16 - Prob. 3CQQCh. 16 - Prob. 4CQQCh. 16 - Prob. 5CQQCh. 16 - If advertising makes consumers more loyal to...Ch. 16 - Prob. 1QR
Ch. 16 - Prob. 2QRCh. 16 - Prob. 3QRCh. 16 - Prob. 4QRCh. 16 - How might advertising reduce economic well-being?...Ch. 16 - Prob. 6QRCh. 16 - Prob. 7QRCh. 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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