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-P
Marginal Revenue: MR=100/N-2Q
Total cost: TC=50+Q(squared)
Marginal Cost: MC=2Q

a. 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 will exist in this market?

Solutions

Expert Solution

(a) Each firms demand curve is given by the following equation: 100 The demand functionisithal nterceptofthe demand u 100 ; (c) Substitute each firms production amount in individual firms demand function. 25 100 100 25 100-25 75 S75 Therefore, eac (e) In the long run, firms make zero profit. 1250 72-50-0 1250 25 N°-25 Therefore, only five fims will exist in the long run.

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

Consider a monopolistically competitive market with N firms. Each firm’s business opportunities are described by the following equations:

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 + Q2Marginal Cost: MC = 2QHow does N, the number of firms in the market, affect each firm’s demand curve? Why? [3 points]How many units does each firm produce? (The answers to this and the next two questions depend on N.) [3 points]What price does each firm...

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...

In the short-run, firms in a monopolistically competitive market are making profits. Explain what will tend...

In the short-run, firms in a monopolistically competitive market are making profits. Explain what will tend to happen to the market and the firms profits in the long-run.

Name at least 3 different ways firms in a monopolistically competitive market differentiate their products.

Sleek Sneakers Co. is one of many firms operating in a monopolistically competitive market for shoes....

Sleek Sneakers Co. is one of many firms operating in a monopolistically competitive market for shoes. a. Assume that Sleek is currently earning short-run economic profits. On a correctly labeled diagram, show Sleek's profit-maximizing output and price, as well as the area representing profit. (10 pts) b. What happens to Sleek's price, output, and profit in the long-run? Explain this change in words, and show it on a new diagram. (5 pts) c. Suppose that over time consumers become more...

Which of the following is most accurate? perfectly competitive firms are price takers. monopolistically competitive firms...

Which of the following is most accurate? perfectly competitive firms are price takers. monopolistically competitive firms offer a differnetiated product. In a duopoly, only two firms are competing Monopolies use the rule MR=MC to maximize profit. All the above.

Describe the characteristics of a perfectly competitive market and a monopolistically competitive market? How are they...

Describe the characteristics of a perfectly competitive market and a monopolistically competitive market? How are they similar? How are they different?

a) State the differences between the monopolistically competitive market and perfectly competitive market. Which market is...

a) State the differences between the monopolistically competitive market and perfectly competitive market. Which market is better for consumers? Explain your answer with 5 examples from Bangladesh. b) State the nature of current market structure in Bangladesh. Discuss the problems and prospects of market structure in Bangladesh with special reference from WASA, PDB, Agricultural products, commercial banks, and Ready-made garments (RMG).

Explain the difference between a monopolistically competitive market and a perfectly competitive market in terms of...

Explain the difference between a monopolistically competitive market and a perfectly competitive market in terms of the immediate consequence of entry by new firms.

A monopolistically competitive firm sells a differentiated product but there are many firms and there is...

A monopolistically competitive firm sells a differentiated product but there are many firms and there is competition involved..How do such firms still manage to promote their product? Do they make Economic profit in the long run?

Subjects