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Consider a monopolistically competitive market with N firms. Each firm ' s business opportunities are described by the following equations: Demand: Q = 100/ N − P Marginal Revenue: MR = 100/ N − 2 Q Total Cost: TC = 50 + Q 2 Marginal Cost: MC = 2 Q 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?

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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305156050
BuyFind

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305156050

Solutions

Chapter
Section
Chapter 16, Problem 7PA
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?

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