1. MONOPOLISTIC COMPETITION onsider the following graph of a monopolistically competitive firm: ↑ Price MC 50- 45- 40 35+ 282822" 25 20 15 10- st MR 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)? d. Is this firm operating with an excess capacity in the short run? Why? When the firm transitions to the long run equilibrium, will it be operating with an excess capacity or not? Explain.
1. MONOPOLISTIC COMPETITION onsider the following graph of a monopolistically competitive firm: ↑ Price MC 50- 45- 40 35+ 282822" 25 20 15 10- st MR 80 Quantity a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm in the short run or long run equilibrium and why? b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that firms in the market are earning, what adjustments will happen in the long run for the market to reach long run equilibrium? c. What is the similarity between the long run equilibrium of this monopolistically competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their long run equilibrium situation (consider price and output levels)? d. Is this firm operating with an excess capacity in the short run? Why? When the firm transitions to the long run equilibrium, will it be operating with an excess capacity or not? Explain.
Chapter14: Monopolistic Competition And Product Differentiation
Section: Chapter Questions
Problem 10P
Related questions
Question
please answer letter D only and provide with complete and neat solution thank you
Transcribed Image Text:1. MONOPOLISTIC COMPETITION
Consider the following graph of a monopolistically competitive firm:
50
45
↑Price
40
35+
30
25
20
15
10
s+
MC
ATC
MR
10 20 30 40 50 60 70 80 Quantity
a. When the firm profit maximizes, what is the amount of the firm's profit or loss? Is this firm
in the short run or long run equilibrium and why?
b. Assume that this firm is typical of other firms in the industry. Given the profit (or loss) that
firms in the market are earning, what adjustments will happen in the long run for the
market to reach long run equilibrium?
c. What is the similarity between the long run equilibrium of this monopolistically
competitive firm from a perfectly competitive firm? What is (are) the difference(s) in their
long run equilibrium situation (consider price and output levels)?
d. Is this firm operating with an excess capacity in the short run? Why? When the firm
transitions to the long run equilibrium, will it be operating with an excess capacity or not?
Explain.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
