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The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run.   A: Identify the area that represents consumer surplus.    B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit?    C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.

The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run.   A: Identify the area that represents consumer surplus.    B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit?    C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter11: Monopoly And Antitrust Policy
Section: Chapter Questions
Problem 27CTQ: Does either the four-firm concentration ratio or the HHI directly measure the amount of competition...
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The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run.

 

A: Identify the area that represents consumer surplus. 

 

B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit? 

 

C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur. 

P MC MC ATC ATC Pg Ps P7 P4 P6 P3 B/ P2 Ps P1 D2 D1 Q2 Q Q3 MR2 Q1 Q2 MR, Q DIAGRAM A DIAGRAM B MONOPOLISTIC COMPETITION
Transcribed Image Text:P MC MC ATC ATC Pg Ps P7 P4 P6 P3 B/ P2 Ps P1 D2 D1 Q2 Q Q3 MR2 Q1 Q2 MR, Q DIAGRAM A DIAGRAM B MONOPOLISTIC COMPETITION
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