Problem

Continuing with the scenario in question $1,$ in …

03:20

Problem 1 Medium Difficulty

Suppose that, due to a successful advertising campaign, a monopolistic competitor experiences an increase in demand for its product. How will that affect the price it charges and the quantity it supplies?

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Principles of Microeconomics for AP® Courses

Chapter 10

Monopolistic Competition and Oligopoly

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Video Transcript

Okay. Now, suppose Dad were and will not police the competitive firm. And then we found a very successful advertising campaign. Okay, eso this successful campaign increases air, the man occurred, and we want to know how this affects prices and on quantity supply. So here, in this graph we have here in the black lines are gonna be original to man curve market cost curve in my general revenue. This point here is where we produced before the success of the campaign on again it's on monopolise. Does we charged at this point up here now that the man is going to increase because we had a very successful campaign invest its red line D too? Um, which would say again that you would produced with Ana Mari Ko, Sam C, but charge a much higher price. Well, there's one thing that is missing, and that's this shift of the marginal revenue curve. You have to be very, um, aware that if the demand increases so this marginal revenue Hey, because mark in our revenue is calculated from our perceived amend curve, we take our the men curve, we say, Well, if this is that the man Kirk for this price, we would have this total revenue for this other price. We would have this other total revenue, and then we will calculate the margin of revenue. So this black line gives you the marginal revenue considering the prices that came from this demand curve. So by changing this aman curve thes original marginal revenue curve is no longer accurate. Okay, so we have to consider the second margin Arabian curve. So our quantity will now be produced here. Right? So we would have an increase. Ah, from Kyu won two Que tu so you would increase quantity. And the rec a Librium price will go from here, which was P one two. This is what we're producing. This is what we're charging. So to pee, too. Thank you. And that's what would happen to price and quantity if we have a really successful campaign

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