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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Sparkle is one of the many firms in the market for toothpaste, which is in long-run equilibrium.

a. Draw a diagram showing Sparkle’s demand curve, marginal-revenue curve, average-total-cost curve, and marginal-cost curve. Label Sparkle's profit-maximizing output and price.

b. What is Sparkle's profit? Explain.

c. On your diagram, show the consumer surplus derived from the purchase of Sparkle toothpaste. Also show the deadweight loss relative to the efficient level of output.

d. If the government forced Sparkle to produce the efficient level of output, what would happen to the firm? What would happen to Sparkle's customers?

Subpart (a):

To determine
Monopolistic Competition and long run equilibrium.

Explanation

Figure 1 illustrates the market equilibrium in the monopolistic industry.

Figure 1

Figure 1 depicts the Sparkle Toothpaste market in long-run equilibrium...

Subpart (b):

To determine
Monopolistic Competition and long run equilibrium.

Subpart (c):

To determine
Monopolistic Competition and long run equilibrium.

Subpart (d):

To determine
Monopolistic Competition and long run equilibrium.

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