Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 10, Problem 2SCQ
Continuing with the scenario in question 1, in the long run, the positive economic profits that the monopolistic competitor earns will attract a response either from existing firms in the industry or film outside. As those films capture the original film’s profit, what will happen to the original film’s profit-maximizing
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You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If not, what should it do to increase profit? If the firm is maximizing profit, is the market in a long-run equilibrium? If not, what will happen to restore long-run equilibrium?
P < MC, P > ATC
P > MC, P < ATC
P = MC, P > ATC
P > MC, P = ATC
Suppose a company creates its own differentiated type of sneaker and is thus considered a monopolistically competitive firm. This firm has a constant marginal cost curve. For each unit of output that the monopolistically competitive firm produces, it costs an additional $50$50. The firm's marginal revenue curve is MR=80−6QMR=80−6Q, where Q is the quantity produced. The firm's perceived demand curve is P=80−3QP=80−3Q.
What is the monopolistically competitive firm's profit-maximizing output and price? Write the exact answer. Do not round.
Suppose the market for kitchen knives is monopolistically competitive and that businesses in this market are currently earning negative economic profits. In the long run, the demand for an individual kitchen knife business will ______ as more kitchen knife businesses leave the market, which will cause economic profits to ______ .
Chapter 10 Solutions
Principles of Economics 2e
Ch. 10 - Suppose that, due to a successful advertising...Ch. 10 - Continuing with the scenario in question 1, in the...Ch. 10 - Consider the curve in the figure below, which...Ch. 10 - Sometimes oligopolies in the same industry are...Ch. 10 - What is the relationship between product...Ch. 10 - How is the perceived demand curve for a...Ch. 10 - How does a monopolistic competitor choose its...Ch. 10 - How can a monopolistic competitor tell whether the...Ch. 10 - If the firms in a monopolistically competitive...Ch. 10 - Is a monopolistically competitive firm...
Ch. 10 - Will the firms in an oligopoly act more like a...Ch. 10 - Does each individual in a prisoners dilemma...Ch. 10 - What stops oligopolists from acting together as a...Ch. 10 - Aside from advertising, how can monopolistically...Ch. 10 - Make a case for why monopolistically competitive...Ch. 10 - Would you rather have efficiency or variety? That...Ch. 10 - Would you expect the kinked demand curve to be...Ch. 10 - When OPEC raised the price of oil dramatically in...Ch. 10 - Andreas Day Spa began to offer a relaxing...Ch. 10 - May and Raj me the only two growers who provide...Ch. 10 - Jane and Bill are apprehended for a bank robbery....
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- The diagram above shows a monopolistically competitive firm in the long run. Answer the questions below. If the firm is currently producing and selling Q1 units, what is the price being charged? Using the points displayed on the diagram, name the rectangular area that represents the total fixed cost of production. Using the points displayed on the diagram, name the rectangular area that represents the total variable cost of production. ) Using the points displayed on the diagram, name the rectangular area that represents the profit or loss. What should the firm do regarding price and/or quantity to minimize its losses?arrow_forwardQuestion 5 Based on market research, a film production company (monopolistically competitive firm) in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P = 1,000 − 10Q Total Revenue: TR = 1,000Q − 10Q2 Marginal Revenue: MR = 1,000 − 20Q Marginal Cost: MC = 100 + 10Q where Q indicates the number of copies sold and P is the price in Ectenian dollars. a. Find the price and quantity that maximize the company’s profit. b. Find the price and quantity that would maximize social welfare. c. Calculate the deadweight loss from monopoly.arrow_forwardSuppose a company creates its own differentiated type of sneaker and is thus considered a monopolistically competitive firm. This firm has a constant marginal cost curve. For each unit of output that the monopolistically competitive firm produces, it costs an additional $50. The firm's marginal revenue curve is MR=200−30Q, where Q is the quantity produced. The firm's perceived demand curve is P=200−15Q. What is the monopolistically competitive firm's profit-maximizing output and price?arrow_forward
- 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 20arrow_forwardIn long run equilibrium, economic profits tend to zero in a perfectly competitive market and also in a monopolistically competitive market. This is true because both market structures share a crucial characteristic. What is the characteristic that causes economic profits to get pushed towards zero in both perfect competition and monopolistic competition?arrow_forwardPRICE (Dollars per shirt) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 ATC True Demand MR + 20 30 40 50 60 70 80 QUANTITY (Thousands of shirts) O False 90 100 + Mon Comp Outcome Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium is average total cost. at the the quantity at which firms minimize True or False: In long-run equilibrium, a monopolistically competitive firm charges a price that is above marginal cost.arrow_forward
- Suppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.arrow_forwardAn industry said to be characterized by monopolistic competition is the apparel industry. Suppose you were hired as a consultant by a firm in this industry. How would you advise the firm as to the levels of output, price, input usage, and advertising? What problems might the firm encounter?arrow_forwardSuppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost PRICE (Dollars per shirt) 0 10 20 True O False MR Demand 60 QUANTITY (Thousands of shirts) ATC 40 BO 190 100 Mon Comp Outcorne Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is Min Unit Cost True or False: This indicates that there is a markup on marginal cost in the market for shirts. at the the efficient scale.arrow_forward
- Suppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to unification the minimum average total cost the firm faces and the quantity associated with that cost. Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that ___ at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium ___ the efficient scale. True or False: This indicates that there is excess capacity in the market for shirts. Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the ___…arrow_forwardYou are a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. P = MC, P > ATCP > MC, P = ATC Illustrating with graph(s), can the firm possibly be maximising profit? If not, what should it do to increase profit? If the firm is profit-maximising, is the firm in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? PLZ EXLAIN MORE DETAILS AND WRITE IT CLEARLY THX!!!arrow_forwardSuppose a country's mobile phone industry is supplied by only two firms (i.e. an oligopoly). Explain how the presence of two firms affects the price elasticity of demand of each firm's output.arrow_forward
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