Monopolistic Competition
Not what you're looking for?
1. Monopolistic Competition
Exhibit 2 shows the short-run demand and cost conditions for a firm under Monopolistic Competition. Replicate the graph. Label the curves and axis.
a. What level of output will maximize the firm's profit?
b. What price will the firm charge?
c. How much revenue will the firms receive in this situation? What is its total cost? Profit?
On your graph, shade the area that represents profit and total cost.
d. How will the situation change in the Long Run?
Hint: Your answer should explain what happens to demand curve in the Long Run. See Lecture notes.
(see diagram in attachment)
Purchase this Solution
Solution Summary
The LR Equilibrium price is determined.
Solution Preview
a. What level of output will maximize the firm's profit?
By first order condition, the firm's profit is maximized when MC = MR
i.e., when 30 units are produced.(MR and MC intersect each other)
b. What price will the firm charge?
The corresponding price is found on the demand curve. So $24 will be charged when 30 units are ...
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.