A) A monopolistic competitive firm produces differentiated products in the market to a large number of buyers. These sellers compete with each other in terms of features offered by their products so as to sell more of their products and thus make more profits.
In such markets, advertising plays a very important role as it highlights the special features of the seller's products and explains why this product is better than the competitor's products. This ways advertising helps firms increase their sales and profits.
B) Since advertising is a costly affair and is an input cost for the firm, the total cost of the firm would increase while keeping production fixed in the first stage, thereby leading to an increase in the average total cost.
Thus, the ATC curve shifts parallelly upwards.
101 Extra Credit- Chapter 14 Review Questions 15 pts. The following graph represents the average total...
11. The following graph represents a firm. (7 pts.) MC ATC 56 32 27 15 17 18 20 MR a. Is this a representation of a monopoly or a firm in the perfectly competitive market? b. What quantity should the firm produce to maximize their profit? c. What quantity is the socially optimum quantity? d. What price should the firm sell their product to maximize their profit? e. What price is the socially optimum price? f. Illustrate in the graph...
3. Is monopolistic competition efficient? Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with...
Question 10
Refer to the following graph to answer the questions that
follow.
The average total cost (ATC) and average variable cost (AVC)
converge as the level of output produced increases because:
the firm is able to purchase more capital and exploit economies
of scale.
the firm experiences gains in productivity from employee
specialization.
average total cost decreases as output increases.
average fixed cost decreases as output increases.
the firm is able to drive its competitors out of business by...
Hero Consider the graph of demand (D), average total cost (ATC), marginal revenue (MR), and marginal cost (MC) for a monopolistic firm. Assume no regulation is in place. Place box A on the graph to represent the profit or loss for the firm before regulation b. Now assume marginal cost pricing is imposed. Place box B on the graph to represent the profit or loss for the firm after marginal cost pricing is imposed. 678910111213141510 12 18 19 20 Market...
b) (4 points) Graph demand, marginal revenue, marginal cost and
average total cost (ATC) below. Mark Q*, P*, ATC* (you’ll have to
calculate it) and the endpoints to all of the curves.
c) (2 points) Given your answers above, explain which curve(s)
will shift in the long run and why.
d) (4 points) Draw the graph that represents this firm in the
long-run. Label the profit-maximizing price and quantity as P* and
Q*, respectively. No numbers are necessary, but be...
Q1: The following graph shows the current short-run average total cost (ATC), short-run marginal cost (MC), and long-run average cost (LATC) curves of a typical perfectly competitive firm that uses only labour and physical capital to produce its product and the current market price (PⓇ). S/unit MC ATC LATC B Pa E Q1 Q2 Quantity a) How many units of output would the firm choose to produce in the short run? Explain. b) Is the firm making an economic profit...
Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 T 90 80 70 60 e 50 8 40 30 20 10 ATC AVC 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of shirts)
Question 23 (2 points) The graph below shows the average total cost and marginal cost curves of a perfectly competitive firm. If the market price is $7, what is the output level that maximizes the firm's profit? 12 11 10 MC ATC 9 8 Price $/Q S 4 3 2 0 1 2 3 6 7 8 9 10 11 12 13 14 15 16 Quantity Q23 Q=4 3 N 1 0 0 4 5 6 7 8 9 10...
CHAPTER 23 – ASSIGNMENT #1 Answer the following questions using
the graph shown below. Assume that the firm is producing the number
of units that will maximize their profit in a perfectly competitive
market. You can use the explanatory for problem 23-3 that are in
the Handouts on the main page of your course website to aid you in
the completion of this problem. The D curve in this problem is the
same as the MR curve. ? • How...
The graph below shows the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves for a firm in a competitive market. These curves imply a short-run supply curve that has two distinct parts. One part, not shown, lies along the vertical axis (quantity = 0); this represents a condition of production shutdown. Where is the other part? Use the straight-line tool to draw it.