The adjacent figure shows the demand curve (D), the marginal revenue curve(MR), and the marginal cost curve (MC) for a monopolistically competitivehamburger restaurant.A change in the slope of which of the following curves will affect theprofit-maximization rule?○A. Marginal cost curveB. Marginal revenue curveC. Demand curve○ D. None of the aboveThe profit-maximizing price for this restaurant is $ and their profit-maximizingquantity ishamburgers per day.Price and cost ($/hamburger)$8.00-$7.00-$6.00-$5.00-$4.00-$3.00-$2.00-$1.00-$0.00+0200MCDMR400600800 1,0001,200Quantity (hamburgers per day)

The profit-maximization rule states that a firm maximizes it's profit by producing an output where…

Answered: The adjacent figure shows the demand…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 10P

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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?
FIGURE 10-1 Price MC ATC AVC D MR Quantity The profit-maximizing firm illustrated in Figure 10-1 operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run? New firms enter the industry and the firm's marginal cost curve shifts up, which leads to a decrease in the firm's O output. New firms want to enter the market but CANNOT since there are barriers to entry in monopolistic competition. The market supply curve shifts right, reducing the equilibrium market price. New firms enter the industry and the firm's demand curve shifts left and becomes more elastic.
The graph below shows the demand curve for a perfectly competitive firm. Suppose that firms in this industry discover a way to differentiate their products. Using the line drawing tool, show how the firm's demand curve would be likely to change. Label the new demand curve 'd,'. Carefully follow the instructions above, and only draw the required objects. Since the demand curve is downward sloping, the monopolistically competitive firm will set a price OA. that is less than marginal cost. B. that is unrelated to marginal cost. OC. that is equal to marginal cost. D. that is greater than marginal cost. Price 10- Q Q Output 10
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 ATC Profit or Loss 300 250 200 150 100 50 0 PRICE (Dollars per bike) MC MR Demand 400 0 50 100 450 500 150 200 250 300 350 QUANTITY (Bikes) Given the profit-maximizing choice of output and price, the shop is making 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. profit, which means there are
The graph shows the demand curve, marginal revenue curve, and cost curves of Bob's Best Burgers, a firm in monopolistic competition. Draw an arrow at the profit-maximizing quantity to show the firm's markup. Because firms (of which Bob's is one) are expect firms to the burger market. we would ⒸA. breaking even; enter OB. incurring an economic loss; increase demand in ⒸC. making an economic profit; enter OD. incurring an economic loss; exit 6.50 5.00- 4.50- 4.00- 3.00 Price and cost (dollars per burr 2.50 MC 50 ATC D MR 100 150 Quantity burgers per day) >>> Draw only the objects specified in the question. ✔ 250 800
Bob competes in a monopolistically competitive market. Suppose some new firms enter the market, causing his perceived demand curve to shift. The following tables show Original Demand Curve his demand curves, before and after the change, and his cost information. Price Quantity TC Assume that Bob can only choose from the quantities of output given in the table. By how much will his profit change after these new firms enter the market? $33 $20,000 $32 1,000 $30,000 $31 2,000 $45,000 $30 3,000 $70,000 $29 4,000 $100,000 New Demand Curve Price Quantity TC $30 $20,000 $29 1,000 $30,000 $28 2,000 $45,000 $27 3,000 $70,000 $26 4,000 $100,000 O his profits will not change O decrease by $9,000 O increase by $11,000 O decrease by $11,000

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