Which of the following is INCORRECT regarding monopolistically competitive firms in the long run? A) They will make economic profit. B) They will break even. C) They will only make normal profit. D) They will make zero economic profit.
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- If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?Aside from advertising, how can monopolistically competitive films increase demand for their products?Make a case for why monopolistically competitive industries never reach long-run equilibrium.
- A monopolistically competitive firm in a long-run equilibrium will likely produce which of the following? A. a technically efficient amount of outputB. less than a technically efficient amount of output and less than an allocatively efficient amount of outputC. more than a technically efficient amount of output but less than an allocatively efficient amount of outputD. an allocatively efficient amount of production.E. less than a technically efficient amount of output and more than an allocatively efficientII. The figure is drawn for a monopolistically competitive firm. PRICE 140 123.33 90 56.67 100 133.33 QUANTITY MC ATC Demand MR Refer to the figure above and explain: A). In order to maximize its profit, how many units the firm will choose to produce? 100 B). When the firm is maximizing its profit, the markup over marginal cost amounts to 50 C). The firm's maximum profit is D). Efficient scale is reached beyond which level of units? 133.333. You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If not, what should it do to increase profit? If the firm is maximizing profit, is the market in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? a. P < MC, P > ATC b. P > MC, P < ATC c. P = MC, P > ATC d. P > MC, P = ATC
- 8. The following graph represents a monopolistically competitive firm in the short-run: Price 50 MC 45 + ATÇ 40 35 30 25 D 20 15 + 10 + 5+ MR + 10 20 30 40 50 60 70 80 Buantity a) If this firm is maximizing profit, which quantity will it produce? b) If this firm is maximizing profit, which price will it charge? c) If this firm is maximizing profit, how much profit will it earn? d) What will happen to price, quantity, and profits in the long-run?Suppose Abercrombie & Fitch sells clothing in a monopolistically competitive market and that a farmer sells oranges in a perfectly competitive market. Part 2 1.) Use the line drawing tool to draw the type of demand curve likely faced by Abercrombie & Fitch. Label this lineDAF. 2.) Use the line drawing tool to draw the type of demand curve faced by an individual orange farmer. Label this line DOranges.are 13-7 sis and evenue $4 P2 MC FM/ ATC E OG AS SS AVC (oo) ubonq aviimoo loiteiloqo sol o bnal Po Demand MA Quantity ure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. 3) Refer to Figure 13-7. Which of the following statements describes the best course of action for the firm depicted in the diagram? * A) The firm should minimize its losses by producing Qy units and charging a price of P1. B) The firm should minimize its losses by producing Qy units and charging a price of P2. C) The firm should minimize its losses by producing Qy units and charging a price of Po. D) The firm should exit the industry because its price is less than its average total cost. 3) A 4) Refer to Figure 13-7. Which of the following is the area that represents the profit or loss experienced by the firm? A) A loss represented by the rectangle PivwPo. B) An accounting profit equal to P1vwPo. C)A loss represented by the rectangle P2uvP1. D) A loss…
- Which of the following is true for a monopolistically competitive industry? * There are many firms, each with a small market share. The firms in the industry produce a standardized product. Firms are price-takers. There are considerable barriers to entry. O There is a small number of independent firms.Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dolars per kit) 100 8 80 70 50 8 10 0 MO 10 ATC 20 30 O True O False MR 60 70 QUANTITY (Thousands of kits) Demand 40 80 90 100 Mon Comp Outcome Min Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for kits. at the optimal quantity for each the minimum average total cost.c. Explain why firms operating in monopolistically competitive markets probably will not earn an economic profit in the long run