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

Expert Solution

c. In the long run, the market will become similar to perfectly competitive market due to free entry and exit of firms. All the firms make normal profit in the long run. However, the market will choose an output level which is below the MES (Minimum Efficient Scale) i.e. average costs are always higher than the marginal costs. Due to this, the firm tends to be inefficient and incur losses.The firm will have excess capactity of production and under-utilize the available resources

Rahul Sunny answered 1 year ago

You are the manager of a monopolistically competitive firm, and your demand and cost functions are...

You are the manager of a monopolistically competitive firm, and your demand and cost functions are given by Q = 36 – 4P and C (Q) = 4 + 4Q + Q(squared). Find the inverse demand function for your firm’s product. Determine the profit-maximizing price and level of production. Calculate your firm’s maximum profits. What long-run adjustments should you expect? 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.

Question 4 (a) Why does a typical monopolistically competitive firm face a downward-sloping demand curve? [3...

Question 4 (a) Why does a typical monopolistically competitive firm face a downward-sloping demand curve? [3 marks] (b) What is meant by the term "excess capacity" as it relates to monopolistically competitive firms? [7 marks]

A monopolistically competitive firm faces the inverse demand curve P = 100 – Q, and its...

A monopolistically competitive firm faces the inverse demand curve P = 100 – Q, and its marginal cost is constant at $20. The firm is in long-run equilibrium. a. Graph the firm's demand curve, marginal revenue curve, and marginal cost curve. Also, identify the profitmaximizing price and quantity on your graph. b. What is the value of the firm's fixed costs? c. What is the equation for the firm's ATC curve? d. Add the ATC curve to your graph in...

Assume a firm in a monopolistically competitive market faces a demand curve which includes the following points:

Assume a firm in a monopolistically competitive market faces a demand curve which includes the following points:Price 12 11 10 9 8 7 6 5 Quantity 2 3 4 5 6 7 8 9 If a profit-maximizing firm chose to produce 6 units of the good, what is the marginal cost of the 6th unit?8635

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?

A perfectly competitive firm is said to face a perfectly elastic demand curve a.) Explain why...

A perfectly competitive firm is said to face a perfectly elastic demand curve a.) Explain why the price elasticity is so high under perfect competition: b.)What is the consequences of a perfectly elastic demand curve on the marginal revenue received by the individual perfect competitor? c.)ased on your answers to b, state the profit optimizing rule (optimal Q) to as it applies to perfect competitors ONLY:

you are hired as the consultant to a monopolistically competitive firm

you are hired as the consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If the firm is profit maximizing, is the firm in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? a. P < MC, P > ATC I would think that the firm can’t possible be maximizing profit. The firm should raise price, so that...

How do the demand curves facing the perfectly competitive firm, the monopolist, and the monopolistically competitive...

How do the demand curves facing the perfectly competitive firm, the monopolist, and the monopolistically competitive firm differ? Explain why these differences arise.

A pie shop in a monopolistically competitive market has a demand curve for their pies given...

A pie shop in a monopolistically competitive market has a demand curve for their pies given by P = 35 - Q. The variable costs of producing a pie are given by the equation VC = 5Q and so the marginal costs are constant at MC = $5. If the pie restaurant is in a long-run equilibrium, what must its fixed costs be? (Write answer without the dollar sign.)

Question