A change in regulations has permanently decreased the profit margins for the monopolistically competitive firms. Is...

A change in regulations has permanently decreased the profit margins for the monopolistically competitive firms. Is this a permanent supply-side shock or demand-side shock? Is the shift inwards or outward?

Expert Solution

Rahul Sunny answered 2 years ago

Question. (World limit: 450 words) Suppose a change in regulations has permanently decreased the profit margins...

Question. (World limit: 450 words) Suppose a change in regulations has permanently decreased the profit margins for the monopolistically competitive firms. (a) Draw the impulse response functions of the economy following the shock. (b) Draw the IS=PC=MR diagrams for this scenario. Make sure you explain every step of the adjustment towards the equilibrium.

Monopolistically competitive market with N firms

Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations:Demand: Q=100/N-PMarginal Revenue: MR=100/N-2QTotal cost: TC=50+Q(squared)Marginal Cost: MC=2Qa. How does N, the number of firms in the market, affect each firms demand curve? Why.b. How many units does each firm produce? (The answer to this and the next two questions depend on N.)c. What price does each firm charge?d. How much profit does each firm make?e. In the long run, how many firms...

Monopolistically competitive firms do not earn profit in the long-run but still they are considered inefficient....

Monopolistically competitive firms do not earn profit in the long-run but still they are considered inefficient. Explain briefly.

compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient...

compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because thery a. do not lower the product price if put prices fall b. waste resources by producing an excess amount of output c. restrict their output levels to maximiz profirs d make economic profits in the long run. which of the following statement is true about a firm in a perfectly competitive market a. the demand for its product is a downward sloping...

true/false explain. Since the firms in a monopolistically competitive industry make zero profit in the long...

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28. Suppose that a monopolistically competitive firm has an economic profit in the short run. in...

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Change of Policy to Improve Productivity Orange Electronics has been experiencing declining profit margins and has...

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