Explanation Monopolisticcompetition has following features: existence of large number of sellers free entry and exit of firms products are differentiated existence of selling costs cross- price elasticity of demand is high but not very high only normal profits in the long run Under monopolistic competition, the equilibrium output is determined by the following condition: P =AC and MR = MC The equilibrium under monopolistic competition is shown below: The equilibrium output and price are Q and P respectively

10th Edition

ISBN: 9781285859484

Author: William Boyes, Michael Melvin

Publisher: Cengage Learning

See similar textbooks

Question

Chapter 12, Problem 3E

To determine

To explain:

The reasons for monopolistic competition is said to be inefficient and if counting the higher price paid by consumer as a part of consumer surplus would change the conclusion regarding efficiency of monopolistic competition.

Expert Solution & Answer

Chapter 12 Solutions

Microeconomics (MindTap Course List)

Ch. 12 - Prob. 1E Ch. 12 - Prob. 2E Ch. 12 - Prob. 3E Ch. 12 - Prob. 4E Ch. 12 - Prob. 5E Ch. 12 - Prob. 6E Ch. 12 - Prob. 7E Ch. 12 - Prob. 8E Ch. 12 - Prob. 9E Ch. 12 - Prob. 10E

Ch. 12 - Prob. 11E Ch. 12 - Prob. 12E Ch. 12 - Prob. 13E Ch. 12 - Prob. 14E Ch. 12 - Prob. 15E Ch. 12 - Prob. 16E

Knowledge Booster

Recommended textbooks for you

Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,
Microeconomics A Contemporary Intro
Economics
ISBN:9781285635101
Author:MCEACHERN
Publisher:Cengage
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning