A monopolistically competitive firm maximizes profit in the short run by producing where Oprice is less than marginal revenue. O price is less than marginal cost. O price is greater than marginal cost. O price is less than average revenue.
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- If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?Macmillan Learning In monopolistic competition, advertising has been introduced as a new method to compete that differs from other markets. The following questions are centered around the topic of advertising. What two changes occur when a firm successfully advertises a product within the market? Supply for the product increases and demand becomes more elastic Demand for the product increases and demand become more inelastic O Demand for the product increases and demand becomes more elastic O Demand for the product decreases and demand becomes more inelastic What is the firm's main goal of advertising? Increase the elasticity of its demand curve Move the market closer to its natural, perfectly competitive state Increase product differentiation O Increase the supply of product in the market Which of the following would be arguments against advertising? ✔Provides a barrier to entry in the market ✔Lowers prices of some products May enhance enjoyment of the product Can lead to increased…(Monopolistic Competition and Perfect Competition Compared)Illustrated below are the marginal cost and averagetotal cost curves for a small firm that is in long-runequilibrium.a. Locate the long-run equilibrium price and quantity ifthe firm is perfectly competitive.b. Label the price and quantity p1 and q1.c. Draw in a demand and marginal revenue curve to illustratelong-run equilibrium if the firm is monopolisticallycompetitive. Label the price and quantity p2 and q2 .d. How do the monopolistically competitive firm’s priceand output compare to those of the perfectly competitivefirm?e. How do long-run profits compare for the two types offirms?
- How do perfectly competitive firms, monopolists, monopolistically competitive firms, and cartels choose the profit -maximizing quantity? A) The quantity at which average total cost is minimizedB) The quantity at which total revenue and total cost are equalC) The quantity at which total revenue is maximizedD) The quantity at which marginal revenue and marginal cost are equalConsider a monopolistically competitive market with NN firms. Each firm's business opportunities are described by the following equations: Demand: Q=100N−PQ=100N−P Marginal Revenue: MR=100N−2QMR=100N−2Q Total Cost: TC=50+Q2TC=50+Q2 Marginal Cost: MC=2QMC=2Q As N rises, the demand for each firm's product: rise or fall? How many units does each firm produce? a: 25 b: 400/N c: 25/N d: 25N What price does each firm charge? a: 75N b: 125/N c: 75/N d: 100/N How much profit does each firm make? a: 1,250/N*2−50 b: 2,500/N*2−50 c: 50+625/N*2 d: 1,875/N*2 In the long run, how many firms will exist in this market?A monopolistically competitive firm produces ________ output than a perfectly competitive firm with the same cost curves.The resulting equilibrium price under monopolistic competition is ________ than the equilibrium price under perfect competition. Question 1Answer a. more; lower b. less; higher c. less; lower d. more; higher
- Consider a simple monopolistic competition industry (many firms) in whicheach firm in the industry has one store. The store costs $200 per week andthe marginal cost is $10 per unit of output in addition to the fixed cost of the store. Hint: Mathematically this problem can be solved just like a monopoly problem. (a) If the typical the demand facing each individual firm is QD = 40−P eachweek, what price will a typical firm in this industry charge? (Hint: IfQD = 40 − P then P = 40 − QD and MR = 40 − 2QD). (b) Is the firm making a positive profit? What is the producer surplus? Whatis the profit after fixed costs? (c) Will new firms enter the market if demand stays the same and new firmsface the same demand and have the same costs? (d) In general, what is the long run profit of an average firm in a monopolistically competitive market.A monopolistically competitive firm has the following cost structure: Output 1 2 3 4 5 6 7 Total Cost($) 30 32 36 42 50 63 77 The firm faces the following demand curve: Price ($) 20 18 15 12 9 7 4 Quantity 1 2 3 4 5 6 7 To maximize profit (or minimize losses), the firm will produce Group of answer choices 2 units. 3 units. 4 units. 5 units.Suppose you operate in a monopoly environment and you set your price inorder to achieve maximum pro ts. 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?
- 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.”Please no written by hand solutions The total cost (TC) of a monopolistic firm is a linear function of output (q), expressed as TC=20q. Market demand for the firm is p=100-2q. a. Determine the monopolistic firm's profit-maximizing output and price. b. Calculate the Lerner Index of the firm. c. Determine the Pareto optimal level of output and price, where the sum of producer and the consumer surplus is maximal. d. Calculate the consumer surplus, producer surplus, and deadweight loss (DWL) in the monopoly case. e. Calculate the loss of consumer surplus and gain of producer surplus due to the monopoly.In what way(s) is a monopolistically competitive firm inefficient? Group of answer choices It charges a price lower than marginal cost. It produces where marginal revenue is equal to marginal cost. It does not produce at the minimum of its average cost curve.
