Would you expect the demand for a monopolistically competitive firm's product to be elastic than that...

Would you expect the demand for a monopolistically competitive firm's product to be elastic than that for a monopolist's product? Explain.

Solutions

Expert Solution

In perfect competition, we assume identical products, and in a monopoly, we assume only one product is available.Monopolistic competition lies in-between. It involves many firms competing against each other, but selling products that are distinctive in some way.

The demand curve as faced by a perfectly competitive firm is perfectly elastic or flat, because the perfectly competitive firm can sell any quantity it wishes at the prevailing market price. In contrast, the demand curve, as faced by a monopolist, is the market demand curve, since a monopolist is the only firm in the market, and hence is downward sloping.

The demand curve as faced by a monopolistic competitor is not flat, but rather downward-sloping, meaning that the monopolistic competitor, like the monopoly, can raise its price without losing all of its customers or lower its price and gain more customers. Since there are substitutes, the demand curve for a monopolistically competitive firm is relatively more elastic than that of a monopoly, where there are no close substitutes.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Would you expect the demand for a monopolistically competitive firm's product to be more or less...

Would you expect the demand for a monopolistically competitive firm's product to be more or less elastic than that for a perfect competition firm’s product? Explain.

You are the manager of a monopolistically competitive firm. The inverse demand for your product is...

You are the manager of a monopolistically competitive firm. The inverse demand for your product is given by P = 180 – 10Q and your marginal cost is MC = 6 + Q. a. What is the profit-maximizing level of output? b. What is the profit-maximizing price? c. What are the maximum profits? Note that C(Q)=5Q + (Q^2)/2 + FC. d. What do you expect to happen to the demand for your product in the long run? Explain.

1a. Consider demand for gasoline in Irvine. Would you would expect demand to be more elastic...

1a. Consider demand for gasoline in Irvine. Would you would expect demand to be more elastic in the short run or the long run? Group of answer choices a. In short run, demand is more elastic b. In long run, demand is more elastic 1b. Please explain your reasoning: (Select all that are true) Group of answer choices a. Because in the short run, prices change more frequently b. Because in the long run, people can switch to greener transportation...

• Which would you expect to be more ‘own-wage’ elastic: the demand for surgeons, or the...

• Which would you expect to be more ‘own-wage’ elastic: the demand for surgeons, or the demand for restaurant workers? Explain, using Hicks – Marshall Laws of Derived Demand.

The demand for the product of a typical firm in a monopolistically competitive market tends to...

The demand for the product of a typical firm in a monopolistically competitive market tends to be more price inelastic than the demand for the product of a monopolist. Do you agree or disagree?

for each of the following, which good would you expect to have more elastic demand and...

for each of the following, which good would you expect to have more elastic demand and WHY? A) Tickets to Disneyland or Healthcare B) Starbucks Coffee or Coffee in general C) Airline Flights during the next year or Airline Flights during the next 3 years D) Milk or Chocolate Milk

1.) The competitive firm's demand curve is a.) unit elastic over the relevant range of output....

1.) The competitive firm's demand curve is a.) unit elastic over the relevant range of output. b.) perfectly elastic over the relevant range of output c.) perfectly inelastic over the relevant range of output d.) elastic above the market price and inelastic below the market price . 2.) If you were operating a fast-food restaurant, which of the following would represent a fixed cost of production in the short run? a.) an annual business license fee paid to the local...

1. Suppose the inverse demand function for a monopolistically competitive firm’s product is given by ?...

1. Suppose the inverse demand function for a monopolistically competitive firm’s product is given by ? = 100 − 2? and the cost function is given by ?? = 52 + 4? 1. Determine the profit-maximizing price and quantity 2. Determine the maximum profits. 3. Can we say that this firm is operating in the long-run or short-run equilibrium at the equilibrium price and quantity? 2. Suppose the inverse demand for a monopolist’s product is given by ? = 110...

1.)The monopolistically competitive firm faces a perfectly elastic demand curve. True False 2.)A local store noticed...

1.)The monopolistically competitive firm faces a perfectly elastic demand curve. True False 2.)A local store noticed that when it increased the price of milk from $2.50 to $3.50 it sold exactly the same amount. Which statement below best describes what that means? A. Demand is perfectly elastic. B. Demand is relatively inelastic. C. Demand is unitary elastic. D. The law of demand is irrelevant. E. The demand is perfectly inelastic. 3.)The increase in total cost from one more unit of...

You are the manager of a monopolistically competitive firm. the present demand curve you face is...

You are the manager of a monopolistically competitive firm. the present demand curve you face is p=100-4Q. your cost function is cQ=50+8.5Q^2 a. What level of output should you choose to maximize profits? b. What price should you charge? c. What will happen in you market in the long run? explain

Subjects