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For each of the following characteristics, say whether it describes a perfectly competitive firm, a monopolistically competitive firm, both, or neither.a. sells a product differentiated from that of its competitorsb. has marginal revenue less than pricec. earns economic profit in the long rund. produces at the minimum of average total cost in the long rune. equates marginal revenue and marginal costf. charges a price above marginal cost
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Okay, so today we're gonna look at the problem up, which basically outlines six different characteristics are fools. And then we have to find out whether these characteristics belonged to a perfectly competitive form, a monopolistic Lee competitive form. Whether that firm can be both or it's neither. Okay, So the waving and dude solution is first really look at the price price and want to Di diagrams, uh, for a P C F or perfectly competent a firm and M C F, which is a monopolistic competitive form uh, we're gonna look at is certain characteristics suggest the marginal revenue. Imagine cost the demand girl D and the average cost. Let's time into it. So first I'm going to draw the price was quantity diagrams for each type of form. Um and then begin take a look what for each character six. And then make you take a look at whether each characteristic is for PCs, for it's for something else. So sure we have price. Uh, that doesn't seem like a prize in the majestic seven little bit price. Want tea? Says, um, B c ah, this is M. C. All right, so we know how a typical marginal costs in modern revenue. Car is dark like this. This is him, See, for emotional costs. Says him are for marginal. Now, even for a monopolistic Lee competitive form, things are fairly going to meet together. So this is M. C. This is Mm. Are okay. Now we know that for perfectly comfort of form, it operate in an environment where it's a price taker or the demand guard is absolutely hard. Still on the hand for a monopolistic company to form the demand cover slightly downward, sloping or generally downward sloping. Why will we come to that answer a little bit later? But you know that, uh, a monopolistic cover to the farm well, as names suggest, has a monopoly so it can charge higher prices for the same quantity of battles. Right? The score is down, but sloping right now, we can also draw the average total cost. Now we know that for perfectly, company the firm in equilibrium the average total cost. Garff will basically passed through this point. Why? I'll explain that in a moment. And for a man optimistically competitive from which has this marginal revenue, let's say that it has in a D C which goes through here. This piece points after basically like Yeah, Okay, um, so we can see that, uh, at the most optimum point for form to operate is when it's marginal. Cost equals. It's much revenue that is its most optimum point because it's the profit maximizing or the last minimizing punch D Ah, I mean, take a look. You're Why's that? So? So let's just first price be and small cube optimally for this guy that you're right, it should be producing at this price and quantity. Praise P. I want to thank you. Now. Why would a formal is opportune? Well, because form has marginal error of new curve like this, right? Um, it's average. Total costs is basically lower than the marginal revenue, which, which means that well, it's making more money for same wanted Salix since breakfast. Right. However, if a new form enters the market, this foam has a pressure do lower its price because the other forms that selling it to you it has to go like this, and similarly, farmers operating here it's making a loss. It does make sense for the form to operate like Bush, the prices up so that you can actually see light at the end of the big forms abused at this point. Bear. See the model cost for much travel. New Madrid driving you girls might cost curve intersect right of the demand. Girl also is at this point as well s the average cost. On the other hand, A for monopolistic, be competitive form. Well, it has some monopoly, right? So it can charge higher prices to its consumers for supplying the same quantity, which is like Raphael Well, least points this is like the middle. Uh right. So this was here. So it's actually selling at a price premium that is above the most upping point that it could operate at first scene. But we also see that. Well, the average cost carve is actually intersecting the marginal cost. Well, yeah, actually not. So this is it. You see, um, and it's okay I can produce here. I'll be selling a creative quantity, but doesn't make actually sense from people as well. I'll be being a Lord Price. That's where the form speeches here. Is that right? We should have been here because this is the most selfish point for its production and smoothly. We can say that. Well, why would it lost virtuous produce here in a similar fashion? Do a perfectly competitive from if it has a margin revenue like above the cause. It's pretty. It has a profit that was produced more but eventually be pressured because even though it's more not ballistically competitive, right? So it has some competition present, which means that there are some price pressures that come in. You have a similar price pressures, both directions, mutual springs. So we now have to set up for the M, C, F and G B C F. Now let's take a look at each off those different characteristics, right? So the first characteristic is it has a differentiated product compared to its competitors. Now we know that, um, okay, First, let's just write down a differentiated product compared Come fact terrorists, right? So we know that a perfectly company from in fact sells products are identical to other phone, so there's no way it's gonna be a perfectly competitive farm. But we know that one obviously does Prague's. They're slightly different from this company. For example, books, right? Huh? Book and Nikon by different offers. My relative, your places. That's clearly now what? There's the second characteristic. See well, cheers, a form that is operating at a point where the marginal revenue is less than it's the price that it said he wouldn't clearly see that the marginal revenue, in fact, equals price. So there's no way it's a perfectly competent however she are. We completely see that the price that act, which this foam is operating at is above the marginal revenue. So this is also a perfect It's a monopolistic up. What a scattered stick seasick. Well, it is that long run, um, long run economic profit. It is great that you know. So for a perfectly competent of form, it has to do. Sure, because this is in fact the point at which it produces the profit maximizing want to eat, but not necessarily economic profit, because if it chooses produced at some other point, it has competitors, and they will push it its production and pricing to the most optimal point so that it doesn't own an economic profit. So it's not be scared. On the other hand, in M C F well limited, well, it it's selling a point that higher than the price of it should be selling. But there's one thing to remember that there are forms in competition in some way to a monopolistic company of farmers. Well, which is pushing, uh, into the most open. So, in fact, it also does not make uh uh, you can on Crawford. The longer at six. No. What does characteristic d c? Well, it's a is that it is producing at point where the average total cost is minimum. We can see quite clearly that yes, for, uh oh PCF It is at a point. Uh, where'd the minimum cost is there? It seems it's a piece here now for the EMS. Yes, we can. We might want to say, Well, it does actually produce this point smell, which is in fact, true. Why? Well, you can see that this is like minimum cost. Security has to be higher prices. So it's fine. Sorry. She e what? Dis ease. But it's a form where miners revenue equals much cost. You can see that bottoms indeed the marginal revenue is actually equaling. The musher costs. We see this point and then see this point So him r m r uh e equals m C. It's true now, finally, for care to stick F It says that well, it's a form that's for using. The price is higher than the Martian cost. Sure, you see that the perfectly comforted from does in fact produce it. Price, who had the marginal cost equals the price. However, an M. C. F is indeed operating at a point where the marshal cost is less than the march. Then the prices are the price. The price is greater much so it's clearly and m c yeah. Hey, All right, so that's our problem. I hope this out to you out understanding the concepts and how we both through, um and yeah, thank you. Looking forward to you and excited.
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