The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run. A: Identify the area that represents consumer surplus. B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit? C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.
The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run. A: Identify the area that represents consumer surplus. B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit? C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.
Chapter11: The Market For Pharmaceuticals
Section: Chapter Questions
Problem 1QAP
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The mobile phone industry is
A: Identify the area that represents
B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit?
C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.
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