Question

"Depending on the characteristics of the market structures, firms will experience different profit maximizing positions in the short-run and long-run." In terms of this statement, discuss the profit-maximizing position of a monopolistically competitive firm and monopolist in the long run

Answer 1

ANS)-- The dissimilarity of the short run and long run in one monopolistically aggressive market place is that in the long term recent businesses or firm can always come in to the market,which is mainly in the case that the company is yielding good economic gain value in the case of the short run.

-- Recent businesses or companies will be greatly liked to these kind of high yielding chances and they will select to come into the market in the long run.And in disparity to monopolistic market place, no obstacles to entry be alive in a monopolistically competitive market,so it is very simple for a new company to come inside the market in long run.

-- The coming of a newer company can make a excess in the contribution of separate products.Now what happens is that the company economic gain become zero and after that there wont be any kind of motivation for the new coming firms to come in to the market.So in the case of long run,the contesting made by the coming of newer company will make the every company in a monopolistically competitive market place to yield common profit gain such as a very correct competitive company.

-- Like a good competitive company,one monopolistically aggressive company ends up selecting a stage of output which is under the least efficient value,which is in utilization of its obtainable resources.In a condition like this we can say that the company have the excess capacity and this is because it can simply lodge a improvement in the production.And this type of excess capacity is the important social price of one monopolistically competitive market composition.

THANKS!!!!!!