In: Economics
Q5) Construct a firm under pure monopolistic condition. Then 4 firms enter the market, when government deregulate monopoly. Graphically, show that equilibrium market price in the long run, when 5 firms construct a cartel. Explain changing process in the market.
(please work on this, if you have enough knowledge about topic !!!! )
LAC= LONGRUN AVERAGE COST
LMC= LONG RUN MARGINAL COST
AR= LEAD AVERAGE REVENUE
MR= LEAD MARGINAL REVENUE AND MC= LEAD MARGINAL COST
MR=MC at point E EQUILIBRIUIM
OM = OUTPUT = OP cost = AM
LAC =AR at point A therefore firm is earning normal profit
LONG-RUN EQUILIBRIUM IN MONOPOLISTIC COMPETITION