. Draw a diagram showing a monopolistically competitive firm earning positive economic profits. What would need...

. Draw a diagram showing a monopolistically competitive firm earning positive economic profits. What would need to happen to bring this market back to long run equilibrium? Illustrate this transition to long run equilibrium from the perspective of the individual firm in your diagram.

Use a graph to show the price and quantity a monopolist would choose facing a downward sloping demand curve. Show the monopolist’s total profits. Using the same graph, show what would happen if the monopolist experienced a decrease in its fixed costs. Show the new equilibrium price, quantity, and total profit

Expert Solution

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Rahul Sunny answered 2 years ago

When a firm is earning positive economic profits, this is an indication that the firm Multiple...

When a firm is earning positive economic profits, this is an indication that the firm Multiple Choice Is using its resources in one of a number of ways that would yield positive economic profits. Should leave this market in the long run. Is using its resources in the best possible way. Is producing at the minimum ATC.

1. Draw a graph of a monopolistically competitive firm that is currently earning a short run...

1. Draw a graph of a monopolistically competitive firm that is currently earning a short run profit. Be sure to include marginal revenue, demand, marginal cost and average total cost curves. What will happen to this firm as it enters the long run? 1b. What would you expect to happen to these initial firms as more and more pubs begin branching out into other markets? Multiple Choice/True False Questions: 1. The fact that pubs are now competing with firms like...

Question 4: Illustrate the model of a perfectly competitive firm that is earning economic profits in...

Question 4: Illustrate the model of a perfectly competitive firm that is earning economic profits in the short-run. Make sure that you label your graph appropriately. Your graph should have the demand curve facing the firm (d0), Price (P0), MR (MR0), MC (MC), and ATC. Identify the optimal level of output (q0), as well as the profit the firm is earning (an area). Illustrate the model of a perfectly competitive firm that is in Long-run equilibrium. Your graph should have...

Does a monopolistically-competitive firm have zero economic profits in the long run? Why or why not?...

Does a monopolistically-competitive firm have zero economic profits in the long run? Why or why not? How might it be different from perfect competition in the long run?

Assume a firm in a monopolistically competitive industry is currently making a short run positive economic profit.

Assume a firm in a monopolistically competitive industry is currently making a short run positive economic profit. Describe what is likely to happen to this firm's profit in the long run. What role does elasticity play in this story?

If a monopolistically competitive firm is earning a normal profit, it: a. can expect to see...

If a monopolistically competitive firm is earning a normal profit, it: a. can expect to see more competitors in the future. b. can expect to see fewer competitors in the future. c. can expect to see about the same amount of competition in the future. d. will probably exit from the market. 2. Both monopolistic competitive and purely competitive firms: a. sell undifferentiated commodities. b. face downward-sloping demand curves. c. earn normal profits in the long run. d. are equally...

Suppose a firm in a perfectly competitive market is earning normal profits and there is an...

Suppose a firm in a perfectly competitive market is earning normal profits and there is an increase in demand. In the short run, the firm earns A. an economic profit as prices rise. In the long run, new firms will enter and prices will rise. B. an economic profit as prices fall. In the long run, new firms will enter and prices will rise. C. an economic profit as prices rise. In the long run, new firms will enter and...

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces, and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1000 units. What is the firm's current profit? Can...

Suppose that a typical firm is receiving economic profits in the short run in a monopolistically...

Suppose that a typical firm is receiving economic profits in the short run in a monopolistically competitive industry. Carefully explain what will happen in the long run to: the number of firms the demand curve facing each firm price individual firm output and industry output economic profits or losses

Draw the following: (a) a perfectly competitive firm that earns profits (b) a perfectly competitive firm...

Draw the following: (a) a perfectly competitive firm that earns profits (b) a perfectly competitive firm that incurs losses, but will continue to operate (c) a perfectly competitive firm that incurs losses and will shut down in the short-run.

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