Suppose that a monopolistically competitive restaurant is currently serving 280 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $13 per meal. Instructions: Enter your answers as a whole number. a. What is this firm's profit or loss? 2$ b. Will there be entry or exit? (Click to select) ♥ Will this restaurant's demand curve shift left or right? (Click to select)·
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- Σ B. 20 10 50 30 20 PRICE (Dollars per bat) Homework (C (91. 4. Is monopolistic competition efficient? Suppose that a firm produces baseball bats 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. 06 Mon Comp Outcome Min Unit CAst 09 40 10 MR Demand pleuwe 09 06 QUANTITY (Thousands of bats) 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 eticall the miair MacBook Pro ACID & 5. R H N command commICE (Dollars per scooter) 3. How short-run profit or losses induce entry or exit Citrus Scooters is a company that manufactures electric scooters in a monopolistically competitive market. The following graph shows the demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC) for Citrus. Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss 500 450 400 360 200 250 200 150 400 50 MC- ATC MR Demand 150 200 250 300 360 400 450 500 QUANTITY (Scooters) + Monopolistically Competitive Outcome Profit or Loss (?) Given the profit-maximizing choice of output and price, Citrus Scooters is earning sellers in the industry relative to the long-run equilibrium amount. Now consider the long run in which scooter manufacturers are free to enter and…2. Entry or exit in the long run Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss. 500 450 Monopolistically Competitive Outcome 400 350 300 Profit or Loss A ATC 250 200 150 MC 100 50 MR Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bikes) Given the profit-maximizing choice of output and price, the shop is earning profit, which means there are shops in the industry than in long-run equilibrium. PRICE (Dollars per bike)
- Refer to Figure 1. If the market price is $2, what the firm will do? Enable Editing 4) Use the figure below to answer the following questions. Price and cost (dollars per unit) 80 MC 60 40 ATC 20 MR 20 40 60 80 100 Quantity (units per week) Figure 2 a) Refer to Figure 2 If this firm is in monopolistic competition, what is its output? b) Refer to Figure 2 If this firm is in monopolistic competition, what is the price it will charge? c) Refer to Figure 2. What is the firm profit situation? What time frame equilibrium is the firm? d) Refer to Figure 2. If this firm in monopolistic competition is in short-run equilibrium, and the firm making profit what will happen in the long run to the firm profit? explain5. How short-run profit or losses induce entry or exit Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss. (? 500 450 Monopolistically Competitive Outcome 400 350 300 Profit or Loss 250 ATC 200 150 100 MC 50 MR Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bikes) Given the profit-maximizing choice of output and price, the shop is making profit, which means there are shops in the industry relative to the long-run equilibrium. Now consider the long run in which bike manufacturers are free to enter and exit the market. PRICE…(b) You are the CEO for a lightweight compasses manufacturer. The demand function for the lightweight compasses is given by p = 40 – 4q²where q is the number of lightweight compasses produced in millions. It costs the company $15 to make a lightweight compass. (i) Write an equation giving profit as a function of the number of lightweight compasses produced. (ii) At the moment the company produces 2 million lightweight compasses and makes a profit of $18,000,000, but you would like to reduce production. What smaller number of lightweight compasses could the company produce to yield the same profit? Problem з
- 2. The demand curve facing a competitive firm The following graph shows the daily market for large cardboard boxes in San Francisco. 0123456789104036322824201612840PRICE (Dollars per large box)QUANTITY (Millions of large boxes)DemandSupply Suppose that Talero is one of more than a hundred competitive firms in San Francisco that produce such cardboard boxes. Based on the preceding graph showing the daily market demand and supply curves, the price Talero must take as given is . Fill in the price and the total, marginal, and average revenue Talero earns when it produces 0, 1, 2, or 3 boxes each day. Quantity Price Total Revenue Marginal Revenue Average Revenue (Boxes) (Dollars per box) (Dollars) (Dollars) (Dollars per box) 0 0 – 1 2 3 The demand curve that Talero faces is identical to which of its other curves? Check all that apply. Marginal revenue…PRICE (Dollars per engine) 100 90 80 70 60 40 30 & 2 20 10 MO D 0 10 ATC MR Demand 20 30 40 50 60 70 DO 90 QUANTITY (Thousands of engines) 100 Mon Comp Outcome Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is average total cost. at the the minimum2. Draw a graph which depicts a short-run equilibrium that will cause exit of firms from a monopolistically competitive industry.
- 2. Two cereal firms that set prices and sell differentiated products propose to merge. Firm 1sells CrunchyCrunch for a price of $10 with a marginal cost of $6. Firm 2 sells FibryFibre for aprice of $12 and a marginal cost of $6.(a) When the price of CC rises, 20% of its lost demand goes to FF. What is the marginal costreduction for CC that is required to offset the upwards pricing pressure on the CC price?(b) You are employed as a consultant by the merging firms. You know that the DOJ knowsthat the marginal cost of FF will fall by 50 cents as a result of the merger, but that the agency isunsure of the diversion between FF and CC. How small will you need to claim that the diversionis in order for there to be no net upwards pricing pressure on the CC price?1. Consider the following graph: Price (dollars per cup) $6.00 MC ATC 3.50 Profit 2.50 Demand 0 1 2 3 45 6 7 8 9 10 Quantity (cafe lattes per week) Profit-maximizing quantity of caté lattes MR a) Is it possible to say whether this firm is a perfectly competitive firm or a monopolistically competitive firm.4. Suppose we have another firm known as Sepanyan Corporation which makes a product known as Yeghias. Suppose the firm’s FC=$8,000 and its TC=$10,000 and its AVC=$5. What is the ATC? a) $25.00 b) $67.50 c) $100.25 d) $200 e) Not enough information 5. Which of the following is true concerning a competitive firm? a) It will produce even when its economic profit is zero b) It prefers not to maximize profits c)t is the only firm in the market d) Its quantity choice will affect the market price e) People’s PED for the firm’s specific product is inelastic