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3. Monopolistic competition in the short run Consider a shop that produces muffins in a monopolistically competitive market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the company is operating in the short run. PRICE AND COSTS (Dollars per muffin) $3.50 $2.75 $2.50 $1.90 $1.00 The profit-maximising level of output is At the profit-maximising output and price, the shop's profit equals Given the profit-maximising choice of output and price, the shop is making there are 1 I MR MC 1 1 1 Demand 230 280 QUANTITY (Muffins per day) muffins per day at a price of 160 ATC each. profit, which means that shops in the industry relative to the long-run equilibrium.

3. Monopolistic competition in the short run Consider a shop that produces muffins in a monopolistically competitive market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the company is operating in the short run. PRICE AND COSTS (Dollars per muffin) $3.50 $2.75 $2.50 $1.90 $1.00 The profit-maximising level of output is At the profit-maximising output and price, the shop's profit equals Given the profit-maximising choice of output and price, the shop is making there are 1 I MR MC 1 1 1 Demand 230 280 QUANTITY (Muffins per day) muffins per day at a price of 160 ATC each. profit, which means that shops in the industry relative to the long-run equilibrium.

Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: Monopolistic Competition
Section: Chapter Questions
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3. Monopolistic competition in the short run Consider a shop that produces muffins in a monopolistically competitive market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the company is operating in the short run. PRICE AND COSTS (Dollars per muffin) $3.50 $2.75 $2.50 $1.90 $1.00 The profit-maximising level of output is At the profit-maximising output and price, the shop's profit equals Given the profit-maximising choice of output and price, the shop is making there are 1 I MR MC 1 1 1 Demand 230 280 QUANTITY (Muffins per day) muffins per day at a price of 160 ATC each. profit, which means that shops in the industry relative to the long-run equilibrium.
Transcribed Image Text:3. Monopolistic competition in the short run Consider a shop that produces muffins in a monopolistically competitive market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the company is operating in the short run. PRICE AND COSTS (Dollars per muffin) $3.50 $2.75 $2.50 $1.90 $1.00 The profit-maximising level of output is At the profit-maximising output and price, the shop's profit equals Given the profit-maximising choice of output and price, the shop is making there are 1 I MR MC 1 1 1 Demand 230 280 QUANTITY (Muffins per day) muffins per day at a price of 160 ATC each. profit, which means that shops in the industry relative to the long-run equilibrium.
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