Question

These three questions please

Question 37 (1 point) Table 16-1 A monopolistically competitive firm faces the following demand curve for its product: Price (S) 10 4 8 7 6 16 8 10 5 12 4 14 3 16 2 18 20 1 Refer to Table 16-1. The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit. What will the firm do? It will produce 2 units; firms will exit the market in the long run. It will produce 4 units; firms will exit the market in the long run. It will produce 6 units; firms will exit the market in the long run. It will produce 8 units; firms will exit the market in the long run.

Answer 1

37. Profit maximizing condition under monopolistic competition is where MR=MC.

P	Q	TR=P(Q)	MR=(change in TR/Change in Q)
10	2	20	-
9	4	36	8
8	6	48	6
7	8	56	4
6	10	60	2
5	12	60	0
4	14	56	-2
3	16	48	-4
2	18	36	-6
1	20	20	-8

MC = $5 per unit

We can see from the table above, that when Q=6 units ,MR>MC and when Q=8 units ,MR<MC. So, the firm will produce 6 units. At this output level , TR= $48 and TC = FC+MC(Q) = 20+5(8) = $60. Because firms are incurring loss , so the firms will exit the market in the long run. Hence,option(C) is correct.

39. In the long run a profit maximizing firm in a monopolistically competitive market operates at a level at which average total cost is falling. Hence,option(C) is correct.

47. Once a cartel is formed,a monopoly structure in effect serves the market. Hence, option(A) is correct.