EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 12, Problem 6DQ
To determine
The monopolistic competition and price fixing.
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Students have asked these similar questions
Answer the question based on the demand and cost schedules for a monopolistically
competitive firm given in the table below.
Price
$18
16
14
12
10
8
Multiple Choice
$8
$12
$14
Quantity
Demanded
1
2
$16
3
4
5
6
What price will this monopolistically competitive firm charge to maximize profits?
Total Cost
$ 10
20
29
36
40
42
Output
1
2
3
4
5
6
>
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs
equal to 20.
Price
$30
$26
$22
$18
$14
$10
$6
Quantity
1
2
3
4
5
6
7
If the firm produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is
incorrect?
O This firm earns $25 profit at the profit-maximizing level of output.
This firm is not operating at its efficient scale.
O This firm is in a long-run equilibrium.
O This firm charges a price of $22 to maximize its profit.
Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's profit?
36
32
28
24
20
16
12
8
4
O
O
1
O
MC1
ATC₁
FAVC₁
Select one:
O
a. $8
b. $-32
c. $-64
d. $12 x Incorrect. The profit maximizing output is 4 units where Marginal cost equals marginal revenue. At that output, use the demand curve to find the price and
calculate total revenue. At that output, use the average cost curve to find the average cost and calculate total cost. Then calculate profit = total revenue - total cost.
MR1
D₁
2 3 4 5 6 7 8 9
Chapter 12 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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- Assume that in short-run equilibrium, a particular monopolistically competitive firm charges $12 for each unit of its output and sells 52 units of output per day. The average total cost (ATC) for those 52 units is $10.Instruction: Round your answers below to the nearest whole number.How much revenue will the firm take in each day? $ What will be the firm's economic profit or loss? of $ Next, suppose that entry or exit occurs in this monopolistically competitive industry and establishes a long-run equilibrium.If the firm’s daily output remains at 52 units, what price will it be able to charge? $ What will be its economic profit or loss? of $arrow_forwardMa3. You operate in a duopoly in which you and a rival must simultaneously decide what price to charge for the same homogeneous product. Assume each you and your rival can choose a “low price” or a “high price”. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3 million. If you charge different prices, the one charging the high price loses $5 million and the one charging the low price makes $5 million. What is the Nash equilibrium for the non-repeated version of this game? Now suppose the game is infinitely repeated. If the interest rate is 10%, can you do better than you could in the non-repeated version of this game? If your answer is “yes”, provide the players’ strategies and any other conditions that must hold.arrow_forwardThe most important factor that drives the long-run profit to zero in monopolistic competition is the elasticity of the market demand curve the elasticity of the firm's demand curve free entry and exit O the reaction of rival firms to a change in price What is one difference between the Cournot and Stackelberg models? O In Cournot, both firms make price decisions simultaneously, and in Stackelberg, one firm sets its price level first O In Stackelberg, both firms make price decisions simultaneously, and in Cournot, one firm sets its price level first O In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first O In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first O Profits are zero in Cournot and positive in Stackelbergarrow_forward
- 6. Suppose that De Beers is a single-price monopolist in the diamond market. De Beers has five potential customers: Raquel, Jackie, Joan, Mia, and Sophia. Each of these customers will buy at most one diamond and only if the price is just equal to, or lower than, her willingness to pay. Raquel's willingness to pay is $400; Jackie's, $300; Joan's, $200; Mia's, $100; and Sophia's, $0. De Beers's marginal cost per diamond is $100. The result is a demand schedule for diamonds as follows: Quantity of diamonds demanded 0 1 2 3 Price of diamond $500 400 300 200 100 0 a) Calculate De Beers's total revenue and its marginal revenue. From calculation, draw the demand curve and the marginal revenue curve. b) Explain why De Beers faces a downward-sloping demand curve and why the marginal revenue from an additional diamond sale is less than the price of the diamond. c) Suppose De Beers currently charges $200 for its diamonds. If it lowers the price to $100, how large is the price effect? How large is…arrow_forwardAssume that Sleek is currently eaming short-run economic profit in a monopolistically competitive market. On the given graph, show Sleek's profit- maximizing output and price. Using the point drawing tool, draw the short-run equilibrium price and quantity for Sleek. Carefully follow the instructions above, and only draw the required objects. From, the given graph we infer that the short-run equilibrium quantity is units and price is $. 14- 12- 10- 8- 6- 4- 2- Price ($) 300 600 MC D ATC MR 900 1200 1500 1800 2100 Quantityarrow_forwardQUESTION 19 Refer to the graph below for a monopolistically competitive firm. Price MC 160 140 ATC 123.33 Demand 90 56.67 MR 100 133.33 154.92 Quantity In the above graph the firm's total revenue at the profit maximization quantity is O $9,000 $16.000 O $14,000 O 55,667arrow_forward
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