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Cost Curves in Perfect Competition and Monopolistic Competition

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C7 TQ3) The following graph (see attachment) shows the cost curves for a perfectly competitive firm. Identity the shutdown point, the breakeven point, and the firm's short-run supply curve.

C7 TQ5) Draw graphs showing a perfectly competitive firm and industry in long-run equilibrium.
(a) How do you know that the industry is in long-run equilibrium?
(b) Suppose that there is an increase in demand for this product. Show and explain the short-run adjustment process for both the firm and the industry.
(c) Show and explain the long-run adjustment process for both the firm and the industry. What will happen to the number of firms in the new long-run equilibrium?

C8 TQ7) The following graph shows a firm in a monopolistically competitive industry. See attached file for graph.
(a) Show the firm's short-run profit-maximizing quantity and price. Is the firm making a profit?
(b) Carefully explain what will happen in the industry over time, and draw a graph of a monopolistically competitive firm in long-run equilibrium.

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Solution Summary

This solution shows long and short run firm and market conditions in a perfectly competitive market, and short run profits in a monopolistically competitive market

See Also This Related BrainMass Solution

Characteristic of Both Monopolistic Competition and Perfect Comp

Which of the following is a characteristic of both monopolistic competition and perfect competition?

1. Firms face singificant barriers to entry
2. A firm's marginal revenue curve is below its demand curve.
3. In the long run, a firm will earn zero economic profit.
4. In the long run, a firm will produce a level of output that corresponds to the minimum point of their average total cost curve.

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