Foundations of Economics, Student Value Edition (8th Edition)
8th Edition
ISBN: 9780134489230
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 17, Problem 8SPPA
To determine
To explain:
The way advertising changes the mark-up and excess capacity of the Company M.
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WataDine is one of a city’s many restaurants that serve breakfast, lunch, and dinner in a monopolistically competitive market. Assume that WataDine, as a restaurant in the city, is currently producing the profit-maximizing output level, and earns positive short-run economic profit.
(a) How is monopolistic competition similar to each of the following market structures?
(i) Perfect competition
(ii) Monopoly
(b) WataDine is currently earning short-run economic profits. Draw a correctly labeled graph for WataDine in short-run equilibrium and show each of the following.
(i) The profit-maximizing quantity, labeled Qm
(ii) The profit-maximizing price, labeled Pm
(c) Given that WataDine is currently earning short-run economic profits, what will happen to each of the following in the long run?
(i) WataDine's economic profit. Explain.
(ii) WataDine's demand curve for its restaurant meals.
(d) Assume WataDine is in long-run equilibrium.
(i) Is WataDine taking advantage of its economies of scale?…
An industry said to be characterized by monopolistic competition is the apparel industry. Suppose you were hired as a consultant by a firm in this industry. How would you advise the firm as to the levels of output, price, input usage, and advertising? What problems might the firm encounter?
In the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a graph
Chapter 17 Solutions
Foundations of Economics, Student Value Edition (8th Edition)
Ch. 17 - Prob. 1SPPACh. 17 - Prob. 2SPPACh. 17 - Prob. 3SPPACh. 17 - Prob. 4SPPACh. 17 - Prob. 5SPPACh. 17 - Prob. 6SPPACh. 17 - Prob. 7SPPACh. 17 - Prob. 8SPPACh. 17 - Prob. 9SPPACh. 17 - Prob. 10SPPA
Ch. 17 - Washtenaw Dairy in Ann Arbor, Michigan, sells 63...Ch. 17 - Prob. 2IAPACh. 17 - Prob. 3IAPACh. 17 - Prob. 4IAPACh. 17 - Prob. 5IAPACh. 17 - Use the following information to work Problems 5...Ch. 17 - Prob. 7IAPACh. 17 - Prob. 8IAPACh. 17 - Prob. 9IAPACh. 17 - Prob. 1MCQCh. 17 - Prob. 2MCQCh. 17 - Prob. 3MCQCh. 17 - Prob. 4MCQCh. 17 - Prob. 5MCQCh. 17 - Prob. 6MCQCh. 17 - Prob. 7MCQ
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- WataDine is one of a city’s many restaurants that serve lunch and dinner in a monopolistically competitive market. Assume WataDine, as a typical restaurant in the city, is currently producing the profit-maximizing output level, and earns positive short-run economic profit. (a) How is monopolistic competition similar to each of the following market structures? (i) Perfect competition (ii) Monopoly (b) WataDine is currently earning short-run economic profits. Draw a correctly labeled graph for WataDine in short-run equilibrium and show each of the following. (i) The profit-maximizing quantity, labeled QM (ii) The profit-maximizing price, labeled PM (c) Given that WataDine is currently earning short-run economic profits, what will happen to each of the following in the long run? (i) WataDine's economic profit. Explain. (ii) WataDine's demand curve for its restaurant meals. (d) Assume WataDine is in long-run equilibrium. (i) Is WataDine taking advantage of its economies of scale? Explain.…arrow_forwardAnswer the question: Aside from advertising, how can monopolistically competitive firms increase demand for their products? What effect would doing this have on the elasticity of the firm’s perceived demand curve? Explain your answers.arrow_forwardAssuming 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 revenue? A graph showing four lines: D1, MC1, AVC1 and ATC1. The horizontal line D1 is at y=20. The curved line MC1 starts at approximately (0,11), curves down to approximately (4,2), curves up to cross AVC1 at approximately (10,16), crosses D1 at approximately (11,20), crosses ATC1 at approximately (12,24), and ends at approximately (13,32). The curved line AVC1 starts above D1 at approximately (2,27), curves down to cross D1 at approximately (5,20), curves down to cross MC1 at approximately (10,16), curves up to cross D1 again at approximately (17,20), and ends at approximately (17,21). The curved line ATC1 starts above D1 at approximately (3,34), curves down to cross MC1 at approximately (12,24), and curves up to approximately (18,28). Group of answer choices $106 $116 $96 $72arrow_forward
- Which of these businesses are in monopolistic competition? Two clothing shops, one selling women's clothing and the other selling kids' clothing Two agricultural producers, each selling a variety of kinds of citrus fruit Two pet stores, one of which sells dog products and the other of which sells bird products Two phone providers, each offering benefits to customers who switch to its servicearrow_forwardIn a perfectly competitive market, the demand curve is the marginal revenue curve. Is this the case in a monopolistically competitive market? Why? Price effect: Output effect:arrow_forwardWhich situation is the best example of monopolistic competition? A. One company controls every steel mill in a country. B. Two gas stations operate on the same busy intersection. C. Two companies own every high-speed Internet provider in a country D. Several computer companies sell laptops with unique features.arrow_forward
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