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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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Chapter
Section
BuyFindarrow_forward

Principles of Microeconomics

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

Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations:

Demand: Q = 100/NP

Marginal Revenue: MR = 100/N − 2Q

Total Cost: TC = 50 + Q2

Marginal Cost: MC = 2Q

a. How does N, the number of firms in the market, affect each firm's demand curve? Why?

b. How many units does each firm produce? (The answers to this and the next two questions depend on N.)

c. What price does each firm charge?

d. How much profit does each firm make?

e. In the long run, how many firms will exist in this market?

Subpart (a):

To determine
Change in number of firms and demand.

Explanation

As the number of firms (N) rises, the demand for each ...

Subpart (b):

To determine
Profit maximizing quantity.

Subpart (c):

To determine
Profit maximizing price.

Subpart (d):

To determine
Profit maximization.

Subpart (e):

To determine
Measuring values of firms inmonopolistic competition.

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