Assume a firm's inverse demand for its product is P = 150 - Q and total cost is TC = 500 + 50Q...
Question:
Assume a firm's inverse demand for its product is {eq}P = 150 - Q {/eq} and total cost is {eq}TC = 500 + 50Q {/eq} for a monopolistically competitive firm:
a) Find marginal revenue (MR) and marginal cost (MC).
b) Calculate the profit-maximizing price and quantity in the short-run.
c) Calculate the firm's profit in the short-run.
d) Explain what happens in the market in response to short-run profitability.
Monopolistic Competition:
Monopolistic competition is a market structure characterized by a large number of firms selling differentiated products and for which there are weak barriers to entry into the market. Firms may differentiate their goods and services on the basis of physical attributes, quality and the location where they operate. Monopolistically competitive firms will earn normal profits in the long-run as competition and weak barriers to entry in the market will drive the profits to zero.
Answer and Explanation: 1
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View this answera) Find marginal revenue (MR) and marginal cost (MC).
The marginal revenue is the change in the total revenue with respect to output. Likewise,...
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Monopolistic Competition: Definition, Theory, Characteristics & Examples
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Chapter 3 / Lesson 56
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