Question

- Compatibility Mode - Word Costs Revenue Q MR Output Costs & Revenue The LONG RUN MC ATC 9 Output MR a What type of market structure is shown in the diagrams above how did you determine this? b. How does this market structure differ from the firm in the diagram in Part 1? c How does this market structure differ from the firm in the diagram in Part 2? d. What are the firm's short run profit maximizing price and quantity? f. What are the firm's long run equilibrium price and quantity everything else equal? Why? e. Why will that be the firm's long run equilibrium price and quantity everything else equal? The firm's long run equilibrium quantity is lower, and it's ATC is higher than it's short run equilibrium position. So what, if any benefit, is there for customers from this market structure? g. Name an example of a firm that operates in a market of this type and explain how it qualifies as the market structure you identified D Focus ENG 6:26 PM 7/29/2020

Answer 1

a) This market structure is Monopolistic comptition firm. because in monopolistic competition in long run downward slope of ATC will be tangent to demand or AR curve and price is also equal to this point.

b) In part 1 there is perfect competition. In perfect competition there is identical product by all firms and demand curve is parallel to horizontal axis but in monopolistic competition there is differentiated products by all firms and demand curve will be downward sloping.

c) In part 2 there is monopoly in which there is only one seller in the industry but in monopolistic competition there are many sellers selling differentiated products.

d) Short run profit maximising output and price is decided where MR=MC.

Here output = Q Price = P

e) Output i long run = Q, Price = P. Output is decided on horizontal axis corresponding to the point where MR=MC and price is decided on demand curve corresponding to the point where MR=MC.

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