The long-run
Concept Introduction:
Perfect Competition- A market is said to be perfectly competitive when it has a virtually infinite number of buyers and sellers selling a homogenous product with free entry into and exit from the market. The buyers and sellers have perfect knowledge about the products and markets and there are no selling and transportation costs. The sellers are price takers and they face a perfectly elastic demand curve.
The monopolistic firm- A form of imperfect competition where there are a very large number of buyers and sellers in the market. The products are nearly but not perfectly homogenous, i.e. there is product differentiation. The entry and exit of firms are free. Unlike the perfect competition, the firms have selling costs and imperfect knowledge marks the structure of the market. The market is a deviation from the ideal but not as competitive as the oligopoly or duopoly market. The demand curve facing the firm here is high though not perfectly elastic. It is a downward sloping demand curve.
Marginal Revenue (MR) - The revenue earned by a firm by selling one additional unit of the output is the marginal revenue of the firm.
Marginal Cost (MC) - The cost incurred by a firm in the production of one more unit of output is the marginal cost of the firm.
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- 37 - At what point should the monopolistic firm produce in order to maximize its profit in the short run? a) MR=AVC B) MC=MR C) MC=AVC D) MR=AC TO) MC=ACarrow_forward19. Dani sells roses in a competitive market where the price of a rose is $8. Use this information to fill out the revenue columns in the table. Quantity of Roses Total Revenue Average Revenue Marginal Revenue 1 2 3 4 5arrow_forward1.How short-run profit or losses induce entry or exit Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. PLEASE HELP MEarrow_forward
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- 6 Suppose that chocolate is a monopolistically competitive industry in both the United States and the EU. Suppose that in the past neither the US nor the EU have allowed chocolate imports from each other. Both now allow free trade in chocolate. The result is that the demand curve for each firm in the United States will be a) More elastic and also that of the EU. b) More elastic and, therefore, less elastic than the EU. c) Least elastic and, therefore, the most elastic that of the EU. d) Answers (B) and (C) may be correct.arrow_forward16 The marginal revenue for a price searcher is: more than total revenue. less than the level of output. less than marginal cost. less than the price.arrow_forwardQuestion 13.13. If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will increase. become less elastic. not be affected. decrease.arrow_forward
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