4. Is monopolistic competition efficient? Suppose that a firm produces polo shirts in a monopolistically competitive…
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Question “4. Is monopolistic competition efficient? Suppose that a firm produces polo shirts in a monopolistically competitive…”
4. Is monopolistic competition efficient? Suppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. 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. ‘ Mon Comp Outcome Min Unit Cost PRICE (Dollars per shirt) MR Demand 0 H + 0 70 80 90 100 10 20 30 40 50 60 QUANTITY (Thousands of shirts) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that at the optimal quantity for each firm. Furthermore, a monopolistically competitive firm’s average total cost in long-run equilibrium is the minimum average total cost. True or False: This indicates that there is a markup on marginal cost in the market for shirts. True o False Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the externality implies that there is too little entry of new firms in the market.
Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that at the optimal quantity for each firm. Furthermore, a monopolistically competitive rage total cost in long-run equilibrium is the minir ge total cost. MR = MC MR > MC True or False: This indicates P = ATC is a markup on marginal cost in the market for shirts. P > ATC . True
Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that at the optimal quantity for each firm. Furthermore, a monopolistically competitive firm’s average total cost in long-run equilibrium is the minimum average total cost. equal to greater than This indicates that there is a markup on marginal cost in the market for shirts. less than Salca
. False product variety business-stealing Monopolistic competition may also be sodiu.. Jause there are too many or too few firms in the market. The presence of the externality implies that there is too little entry of new firms in the market.
Answer
4. Is monopolistic competitiveness efficient? Let’s say that a company produces polo shirts on a market with monopolistic competition. The graph below shows the firm’s demand curve, marginal revenue curve, marginal cost curve (MC), and average total cost curve (ATC). To indicate the equilibrium price and quantity of this firm’s long-term monopolistically competitive equilibrium, place a plus symbol (black point) on the graph. Place a black point (plus symbol) on the graph to indicate the equilibrium price and quantity for this firm. Mon Comp Outcome Minimal Unit Cost PRICE (Dollars/shirt) MR Demand 0 + (0 70 80 90 100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 MR Demand 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 40 50 60 QUANTITY (Thousands) This market is monopolistically competitive. A monopolistically competitive firm will have a lower average total cost than the minimum average total cost. False or True: This means that there is a markup in marginal cost on the market for shirts. True, IT IS TRUE. False Monopolistic Competition may also prove to be socially inefficient as there are not enough or too many firms on the market. The PRODUCT VARIETY externality indicates that there is not enough entry for new firms to the market.
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