Starting from the long-run trade equilibrium in the monopolistic competition model, as illustrated in the accompanying figure, consider what happens when industry demand D increases. For instance, suppose that this is the market for cars, and lower gasoline prices generate higher demand D. a. Show the resulting shift in the D/NT, d, and mr curves. Assume the price increases to $13. Place point A on the new short-run equilibrium.

Starting from the long-run trade equilibrium in the monopolistic competition model, as illustrated in the accompanying figure, consider what happens when industry demand D increases. For instance, suppose that this is the market for cars, and lower gasoline prices generate higher demand D. a. Show the resulting shift in the D/NT, d, and mr curves. Assume the price increases to $13. Place point A on the new short-run equilibrium.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 6P

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