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Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal revenue (MR) curve, marginal cost (MC) curve, and long-run average total cost (LRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 90 Monopolistic Competition Outcome 80 70 60 Perfect Competition Outcome LRATC 50 40 30 D 20 10 MC MR 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) PRICE, COSTS, AND RE VENUE (D oll ars per jacket)

Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal revenue (MR) curve, marginal cost (MC) curve, and long-run average total cost (LRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 90 Monopolistic Competition Outcome 80 70 60 Perfect Competition Outcome LRATC 50 40 30 D 20 10 MC MR 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) PRICE, COSTS, AND RE VENUE (D oll ars per jacket)

Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 11PAE
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Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal revenue (MR) curve, marginal cost (MC) curve, and long-run average total cost (LRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 90 Monopolistic Competition Outcome 80 70 60 Perfect Competition Outcome LRATC 50 40 30 D 20 10 MC MR 10 20 30 40 50 80 70 80 90 100 QUANTITY (Thousands of jackets) Compare the average total cost and the production level in the long-run equilibrium for a monopolistically competitive firm and a perfectly competitive firm by completing the following table. Average Total Cost Production Level Under... (Dollars per jacket) (Thousands of jackets) PRICE, COSTS, AND RE VE NUE (D oll ars per jacket)
Transcribed Image Text:Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal revenue (MR) curve, marginal cost (MC) curve, and long-run average total cost (LRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 90 Monopolistic Competition Outcome 80 70 60 Perfect Competition Outcome LRATC 50 40 30 D 20 10 MC MR 10 20 30 40 50 80 70 80 90 100 QUANTITY (Thousands of jackets) Compare the average total cost and the production level in the long-run equilibrium for a monopolistically competitive firm and a perfectly competitive firm by completing the following table. Average Total Cost Production Level Under... (Dollars per jacket) (Thousands of jackets) PRICE, COSTS, AND RE VE NUE (D oll ars per jacket)
100 90 Monopolistic Competition Outcome 80 70 60 Perfect Competition Outcome LRATC 50 40 30 D 20 10 MC MR 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) deadweight loss, excessive production, excess capacity Compare the average total cost and the production level in the long-run equilibrium for a monopolistically cophpetitive firm and a perfectly competitive firm by completing the following table. Average Total Cost Production Level Under... (Dollars per jacket) (Thousands of jackets) Monopolistic Competition Perfect Competition the same, less than, more than Because this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium is the long-run average cost it would achieve as a firm operating in a perfectly competitive market. the same, less than, more than The production level of a monopolistically competitive firm in long-run equilibriun is firm. This difference in output is known as the the production level of a perfectly competitive of a monopolistically competitive firm. PRICE, COSTS, AND RE VE NUE (D oll ars per jacket)
Transcribed Image Text:100 90 Monopolistic Competition Outcome 80 70 60 Perfect Competition Outcome LRATC 50 40 30 D 20 10 MC MR 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) deadweight loss, excessive production, excess capacity Compare the average total cost and the production level in the long-run equilibrium for a monopolistically cophpetitive firm and a perfectly competitive firm by completing the following table. Average Total Cost Production Level Under... (Dollars per jacket) (Thousands of jackets) Monopolistic Competition Perfect Competition the same, less than, more than Because this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium is the long-run average cost it would achieve as a firm operating in a perfectly competitive market. the same, less than, more than The production level of a monopolistically competitive firm in long-run equilibriun is firm. This difference in output is known as the the production level of a perfectly competitive of a monopolistically competitive firm. PRICE, COSTS, AND RE VE NUE (D oll ars per jacket)
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