Answered: Which of the following statements are…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Perfect Competition

The market for peanut butter in Nutville is monopolistically competitive and in long-run equilibrium. The following graph shows the marginal-cost (MC) curve and the average-total-cost (ATC) curve for a peanut-butter-producing firm. It also shows the demand curve and marginal-revenue (MR) curve faced by a firm operating in a monopolistically competitive environment. One day, consumer advocate Skippy Jif discovers that all brands of peanut butter in Nutville are identical. Thereafter, the market becomes perfectly competitive and again reaches its long-run equilibrium.

Which of the following statements are true for a typical firm in this market given the transition from monopolistic competition to perfect
competition? Check all that apply.
Marginal cost remains unchanged.
The quantity increases.
Profit decreases.
The price remains unchanged.
O Average total cost decreases.

(?
Demand
Profit Max Under MC
Perfect Comp. Outcome
АТС
MC
MR
Quantity
Price, Cost, Revenue

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