Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations: A. Demand: QD = (100 / N) – P Marginal Revenue: MR = (100 / N) – 2*Q Total Cost: TC = 50 + Q? Marginal Cost: MC = 2*Q Provide an expression for this firm's Average Variable Cost (AVC). Is AVC U-shaped here? Why or why not? Explain with reference both to marginal cost and to marginal product. а. 1
Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations: A. Demand: QD = (100 / N) – P Marginal Revenue: MR = (100 / N) – 2*Q Total Cost: TC = 50 + Q? Marginal Cost: MC = 2*Q Provide an expression for this firm's Average Variable Cost (AVC). Is AVC U-shaped here? Why or why not? Explain with reference both to marginal cost and to marginal product. а. 1
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 1.1P
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Transcribed Image Text:Consider a monopolistically competitive market with N firms. Each firm’s
business opportunities are described by the following equations:
А.
Demand:
QD = (100/ N) – P
Marginal Revenue:
MR = (100 / N) – 2*Q
-
Total Cost:
TC = 50 + Q²
Marginal Cost:
MC = 2*Q
Provide an expression for this firm's Average Variable Cost (AVC). Is
AVC U-shaped here? Why or why not? Explain with reference both to
marginal cost and to marginal product.
а.
1
i.
Which of the following represents this firm's AVC?
AVC = 2*Q
AVC = Q?
AVC = (50/ Q) + Q
AVC = Q
a.
b.
с.
d.
ii.
The AVC curve
U-shaped here, because MC only
as
Q increases, implying that the marginal product of labor only.
as L increases.
Is ; decreases ; increases
Is not ; increases ; increases
Is ; increases ; decreases
Is not ; increases ; decreases
а.
b.
с.
d.
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