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-2Q Total Cost: TC=50+Q2 Marginal Cost: MC=2Q a. How does N, the number of firms in the market , affect each firms demand curve? Why? b. How many units does each firm produce? (The answer 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?

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-2Q Total Cost: TC=50+Q2 Marginal Cost: MC=2Q a. How does N, the number of firms in the market , affect each firms demand curve? Why? b. How many units does each firm produce? (The answer 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?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter26: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 10E

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Question

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-2Q

Total Cost: TC=50+Q²

Marginal Cost: MC=2Q

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

b. How many units does each firm produce? (The answer 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?

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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