The graph below is for a profit–maximizing firm in monopolistic competition. Place point A at the firm's output and price combination. Place point B at the firm's output and price combination if it were in a perfectly competitive industry. Then answer the questions. 10 9 8 7 6 $ 5 4 3 2 1 0 0 1 2 3 4 5 6 7 8 9 10 Quantity MC A B ATC MR Demand What will average total cost be for the monopolistically competitive firm? What will long-run output be for the monopolistically competitive firm? $ units What will average total cost be for the perfectly competitive firm? What will long-run output be for the perfectly competitive firm? $ units
Added by Natalia A.
Close
Step 1
This is where the marginal cost (MC) curve intersects the marginal revenue (MR) curve. Let's say this is at point A, which corresponds to a quantity of 5 units and a price of $6. So, the average total cost (ATC) for the monopolistically competitive firm is the Show more…
Show all steps
Your feedback will help us improve your experience
Majid Borumand and 82 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Andrew D.
Crystal W.
A perfectly competitive firm has the following short-run total cost: $$ \begin{array}{c|c} \text { Quantity } & \text { TC } \\ \hline 0 & \$ 5 \\ 1 & 10 \\ 2 & 13 \\ 3 & 18 \\ 4 & 25 \\ 5 & 34 \\ 6 & 45 \end{array} $$ Market demand for the firm's product is given by the following market demand schedule: $$ \begin{array}{c|c} \text { Price } & \text { Quantity demanded } \\ \$ 12 & 300 \\ 10 & 500 \\ 8 & 800 \\ 6 & 1,200 \\ 4 & 1,800 \end{array} $$ a. Calculate this firm's marginal cost and, for all output levels except zero, the firm's average variable cost and average total cost. b. There are 100 firms in this industry that all have costs identical to those of this firm. Draw the shortrun industry supply curve. In the same diagram, draw the market demand curve. c. What is the market price, and how much profit will each firm make?
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Watch the video solution with this free unlock.
EMAIL
PASSWORD