GoGo Pizza is producing at the profit-maximizing level of output in a monopolistically competitive market.i. Show GoGo Pizza’s profit-maximizing level of output, selling price, and a positive profit in a diagram. Briefly explain. ii. Does GoGo Pizza have an incentive to produce at the level of output that maximizes the social welfare? Explain with the diagram in part (i).

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Asked Jan 4, 2020
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GoGo Pizza is producing at the profit-maximizing level of output in a monopolistically competitive market.


i. Show GoGo Pizza’s profit-maximizing level of output, selling price, and a positive profit in a diagram. Briefly explain. 


ii. Does GoGo Pizza have an incentive to produce at the level of output that maximizes the social welfare? Explain with the diagram in part (i).

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Expert Answer

Step 1

Monopolistic Market:

Monopolistic market refers to the market situation where there are limited or countable amounts of firm or seller and a large number of buyers dealing with differentiated goods.

Step 2

From the diagram, MR is the marginal revenue curve, D is the demand curve, MC stands for the marginal cost curve and ATC is the average total cost of producing the commodity. The profit-maximizing output exists at a level, where the MR curve intersects the MC curve (MR =...

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