Answer the following questions comparing monopolistic competition to perfect competition. I. In the long run, how...

Answer the following questions comparing monopolistic competition to perfect competition.

I. In the long run, how does the profit earned by a firm operating in a monopolistically competitive market compare to the profit the same firm would earn if it were instead operating in a perfectly competitive market?Please explain.b. In the long run, how does the average cost of production for a firm operating in a monopolistically competitive market compare to the average cost of production for the same firm if it were instead operating in a competitive market?Please explain.

II. b. In the long run, how does the average cost of production for a firm operating in a monopolistically competitive market compare to the average cost of production for the same firm if it were instead operating in a competitive market? Please explain.

Expert Solution

SOLUTION:-

ANSWER-1

In short run the monopolistic firm would be earning economic profit due to unique product sold in the market. the AR would be greater than the ATC and the margin would be economic profit the firm is earning but in long run the ATC would be tangent to AR curve and due to entry of new firms the firms would be earning normal profit and operating at break even point same as perfect competitive market., futhermore the AR curve in perfect competition is parallel to horizontal axis but in monopolistic competition the AR curve is downward sloping because sale a firm would have to decline the price of marginal units.

ANSWER-2

In long run the monopolistic firm's ATC would be tangent to AR curve which would represent break even point. in perfect competition the ATC = MR = AR it would also represent break even point. the main difference is that in monopolistic competition the firm has kept excess capacity to eliminate the decreasing return to scale, but this would be applicable for some time and eventually the firm's total cost would be equal to perfectly competitive firm.

THANK YOU

If any quearies please leave your valuable comment on comment box................

Rahul Sunny answered 1 year ago

Answer the following questions comparing monopolistic competition to perfect competition. a. In the long run, how...

Answer the following questions comparing monopolistic competition to perfect competition. a. In the long run, how does the profit earned by a firm operating in a monopolistically competitive market compare to the profit the same firm would earn if it were instead operating in a perfectly competitive market? Please explain. b. In the long run, how does the average cost of production for a firm operating in a monopolistically competitive market compare to the average cost of production for the...

Describe and illustrate the difference between perfect competition and monopolistic competition in the long run. Comment...

Describe and illustrate the difference between perfect competition and monopolistic competition in the long run. Comment on long run profit, price sensitivities that firms are responding to as well as welfare and efficiency outcomes in both cases.

1. In both perfect competition and monopolistic competition, in the long run typical firms earn zero...

1. In both perfect competition and monopolistic competition, in the long run typical firms earn zero economic profit. Which of the market characteristics is most responsible for this zero economic profit? There are many buyers and sellers in these markets. There is no government control of price in these market. Identical (homogeneous) products are sold in these markets. Differentiated products are sold in these markets. There are no significant barriers to entry to these markets. 2. If a firm in...

Explain the differences between perfect competition and monopolistic competition. b. Explain the long run equilibrium for...

Explain the differences between perfect competition and monopolistic competition. b. Explain the long run equilibrium for a monopolistically competitive firm that is earning economic profits in the short run.( use diagram to support answer)

Questions How is monopolistic competition like monopoly? How is it like perfect competition? Draw a diagram...

Questions How is monopolistic competition like monopoly? How is it like perfect competition? Draw a diagram depicting a firm that is making a profit in a monopolistically competitive market. In the long-run, do monopolistically competitive firms produce the socially optimal quantity of their product? Why or why not? Why is advertising important in monopolistically competitive markets, but not in perfectly competitive or monopolistic markets? There are four basic solutions to handling monopolies: 1. Break it up (through anti-trust laws); 2....

Which of the three industries (perfect competition, monopolistic competition, monopoly) can sustain long-run economic profit? Why?

In the situation of perfect competition, in long run equilibrium which of the following is not...

In the situation of perfect competition, in long run equilibrium which of the following is not true: the marginal cost curve intersects the average cost curve at the minimum point of the average cost curve. average costs are equal to the market price of the good. average costs are equal to marginal revenue. the demand curve facing the individual firm has a downward slope. Assuming long-run equilibrium exists, when demand increases in a perfectly competitive market, in the long run...

4. Perfect competition vs. monopolistic competition: (a) What is the difference between perfect competition and monopolistic...

4. Perfect competition vs. monopolistic competition: (a) What is the difference between perfect competition and monopolistic competition? (b) Suppose the only long-run adjustment is free entry or exit of firms. What is the difference between the short-run equilibrium conditions faced by a perfectly competitive firm and a monopolistically competitive firm? How about the long-run equilibrium conditions?

Explain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect...

Explain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect competition?

Microeconomics How does monopolistic competition differ from perfect competition? “ As monopolistic competition leads to excess...

Microeconomics How does monopolistic competition differ from perfect competition? “ As monopolistic competition leads to excess capacity, there will be an unambiguous social gain if government regulation reduces the number of firms and eliminates excess capacity.” What is meant by excess capacity? Demonstrate (on a graph) that monopolistic competition leads to excess capacity. Do you agree or disagree with the statement’s policy recommendation? Why? Explain?

Question