Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 3CACQ
(A)
To determine
The firm's optimal outputis to be explained.
(B)
To determine
The firm's optimal priceis to be explained.
(C)
To determine
The firm's maximum profitis to be explained.
(D)
To determine
The adjustments that the manager should be anticipating is to be explained.
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The following graph summarizes the demand and costs for a firm that operates in a monopolistically competitive market.
What is the firm’s optimal output?
2. What is the firm’s optimal price?
3. What are the firm’s maximum profits?
4. What adjustments should the manager be anticipating
Westchesser Gloves is a monopolistically competitive firm that sells leather gloves.
Use the graph to highlight the area of profit or loss and answer the questions,
Price per pair (5)
10 20
Marginal
profit or loss: $
Aver co
Pairs of gloves (in thousand)
Demand
70 80 90 100
Profit or loss
Calculate Westchesser's profit or loss at the profit-maximizing price.
What will happen to the number of firms in this industry in the long run?
Firms will enter this industry, increasing the price at which each firm can sell their gloves until firms begin to earn
normal profits.
O Firms will exit this industry, increasing the price at which each firm can sell their gloves until firms begin to carn
normal profits.
O Firms will exit this industry, decreasing the price at which each firm can sell their gloves until firms begin to carn
normal profits.
O Firms will enter this industry, decreasing the price at which each firm can sell their gloves until firma begin to carn
normal profits
The following graph represents a monopolistically competitive firm in long-run equilibrium.
Place the black point (cross sign) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive
company. Next, place the grey star on the graph to indicate the point where the LRAC reaches a minimum.
PRICE PER UNIT (Dollars)
500
450
400
350
300
250
200
150
100
50
MC
0
0
50
LRAC
MR
Demand
100 150 200 250 300 350 400 450 500
QUANTITY (Units)
Monopolistically Competitive Outcome
Minimum of the LRAC
The long-run equilibrium price is $
(Hint: Use the graph to find the numeric value of the price at equilibrium.)
The long-run equilibrium quantity is
units.
The LRAC curve is at its minimum at a quantity of
The long-run equilibrium price is
units.
the marginal cost of producing the equilibrium output.
?
Chapter 8 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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Similar questions
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