A monopolistic competitor wishing to maximize profit will select a quantity where marginal cost equals demand. marginal revenue equals average cost. marginal cost equals average cost. O marginal revenue equals marginal cost.
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- Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium for such a market. b. Now suppose the demand for Hula Hoops shifts outward slightly. Show that, in general (contrary to the competitive case), it will not be possible to predict the effect of this shift in demand on the market price of Hula Hoops. c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.A monopolistically competitive firm will increase itsproduction ifa. marginal revenue is greater than marginal cost.b. marginal revenue is greater than average total cost.c. price is greater than marginal cost.d. price is greater than average total cost.Suppose you operate in a monopoly environment and you set your price inorder to achieve maximum prots. Is your demand elastic, unitary elastic, or inelastic? Does your answer change if you were in a monopolistically competitive market? What happens to the elasticity when you go from a monopolistic market to a monopolistically competitive one? Explain and give an example. Retailer companies sell many products for which manufacturers have a sug-gested retail price printed on the package. Is there an economic reason for this price? If you are the manager of a retailing outlet, what factors will determine whether you should charge the suggested retail price or some higher or lower price?
- if a monopolistic firm takes over a perfectly competaive market we would expect to see market price of the goof to fall because demand is perfectly eleastic rise and quantity is sold fall as the monopolist tries to increase sales rise and the quantity sold to increaseQuestion 10A monopolistic producer of two goods, G1 and G2, has a joint total cost function TC = 5Q1 + Q1Q2 + 5Q2Where Q1 and Q2 denote the quantities of G1 and G2 respectivel. If P1 and P2 denote the corresponding prices then the demand equations areP1 = 40 − Q1 + Q2P2 = 20 + 2Q1 − Q2a) Find the total revenue function for each goodb) Find the profit function for the firmc) Find the maximum profit if the firm is contracted to produce a total of 12 goods of either typed) Find the price that the firm is supposed to charge for each good.e) Estimate the new optimal profit if the production quota increases by 2 unitsQ9. A fundamental feature of a monopolistic market is that the firm ________. * a) can sell any quantity it desires at the current market price b) can obtain any price for any quantity of output c) faces a perfectly inelastic demand curve d) faces the price and quantity trade-off dictated by market demand Q2. Which of the followings is an appropriate statement about the "limit pricing" strategy"? * a) The strategy is most effective in a perfectly competitive market. b) Goods and services are sold by suppliers at a price higher than the short-term profit maximizing level. c) The main purpose of the strategy is to protect the existing firm's long-run profits from damage by competition. d) The main purpose of the strategy is to charge each customer the maximum price he or she is prepared to pay for the product. Q3. Which of the followings is an example of second degree price discrimination? * a) Ladies' night in a bar b) Half-price tickets for kids in the cinema…
- If a monopolistically competitive firm is earning positive profits in the short-run, then we would expect more competition to enter the industry assuming there are no barrier to entry in the market: True or FalseTying as a Bundling Strategy Ginnie's Gym Refreshment Bar Hydration Power Drink Satisfying Smoothie Early 7.00 5.00 Late 6.00 10.00 Ginnie has observed that her signature item, the Satisfying Smoothie, is very popular with the late evening crowd at the gym, but it is not so popular with the early crowd. The early and late crowds have only slightly different preferences for her Hydration Power Drink. The gym has a very large clientele, and Ginnie can’t always tell who has the late-crowd preference and who has the early-crowd preference. In her graduate MBA class, they have been studying tying as a bundling strategy. Ginnie asked her professor, “Would bundling work for my business?” Her professor said, “I think you told me that the marginal costs for you two products differ significantly, so first, I would recommend that you look at the contribution margin for each. Sometimes, low prices may be more profitable and sometimes high prices will be…When production is undertaken by a monopolistic firm as opposed to a firm in a perfectly competitive market, we generally observe that a. More is produced and there is a loss in surplus. b. More is produced and surplus is increased. C. Less is produced and there is a loss of surplus. d. Less is produced and there is an increase in surplus
- İn Monopolistic Market total cost function is TC=2*Q+10. İf Demand function P=10-2*Q then fin Profit maximum and consumer surplus?Compare the elasticity of the monopolistic competitor’s demand with that of a pure competitor and a pure monopolist. Assuming identical long-run costs, compare graphically the prices and outputs that would result in the long run under pure competition and under monopolistic competition. Contrast the two market structures in terms of productive and allocative effifi ciency. Explain: “Monopolistically competitive industries are characterized by too many firms, each of which produces too little.”In the monopolistically competitive market, we expect the firms to avoid changing the price because of the uncertainty regarding how the competitors will behave. True False