If a firm sells its output on a market characterized by a single seller and many buyers of a homogeneous product for which there are no close substitutes, then the firm is a: Select one: a. Oligopoly b. Perfect Competitive. c. Monopolist d. Monopolistic Competitor.
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- 3. The dancing machine industry is a duopoly. The two firms, Chuckie B Corp. and Gene Gene Dancing Machines, compete through Cournot quantity-setting competition. The demand curve for the industry is P = 100 – Q, where Q is the total quantity produced by Chuckie B and Gene Gene. Currently, each firm has marginal cost of $40 and no fixed cost. Find the equilibrium price, quantity produced by each firm, and the profit of each firm. Now suppose the two firms were to form a cartel. What would be the quantity produced by each firm in the cartel agreement? What would be the profit of each firm? Suppose that Chuckie B was considering cheating on the cartel agreement and it guesses that Gene Gene is going to stick to the cartel agreement. What is the profit maximizing output of Chuckie B in that case? Is the cartel sustainable?Exhibit 10.5 Price 3.25 3.00 2.50 0 700 1,000 MC MR ATC D = AR Quantity Exhibit 10.5 shows the demand, marginal revenue, and cost curves for a monopolistically competitive firm. At the profit-maximizing (or loss-minimizing) output and price, the firm would O a. have to expand to stay in business in the long run. O b. be better off shutting down, since total revenue does not cover fixed costs. O c. be experiencing an economic loss. O d. be earning an economic profit. O e. be earning zero economic profit.QUESTION 1 Press F11 to exit full screen Which firm would earn profit in the long-run? O a monopolist firm. O a monopolistically competitive firm. O an oligopoly firm. O a perfectly competitive firm. QUESTION 2 Refer to the graph below for a monopolistically competitive firm. ↑Price MC 160 140 ATC 123.33 Demand 90 56.67 MR 100 133.33 154.92 Quantity If the above firm chose to produce at 100 units then the firm will be O earning a profit O incurring a loss O there is no profit and no loss O the firm can earn, profit, loss or break even
- 2. Consider an industry with two firms 1 and 2, each having marginal cost equal to zero. The industry demand is P(Y) = 60 – Y, where Y = y, + y2 is total output. a. What are the competitive equilibrium output and price of the market? b. Draw the demand schedule given output equals to 0, 10, 20, 30, 40, 50, 60, and indicate the corresponding profits. What are the monopolistic output and price if there is only one firm? If there are two firms who collude with each other to decide their quantities, what are the output quantities of two firms? c. If the two firms decide their quantities independently and simultaneously, use game theory to show if they have incentive to increase their quantities by 5 units than the above level. If so, do they have incentive to increase their quantities by 5 units further?S Profit Maximization Suppose that a monopolistically competitive restaurant is currently serving 260 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Instructions: Enter your answers as a whole number. a. What is this firm's profit or loss? $ 520 b. Will there be entry or exit? Entry Will this restaurant's demand curve shift left or right? Left In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Suppose that the allocatively efficient output level in long-run equilibrium is 210 meals. c. What is the size of the firm's economic profit? $ 460 d. Is the deadweight loss for this firm greater than or less than $90? Less thanPlace 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 that cost. PRICE (Dolars per kit) 100 8 80 70 50 8 10 0 MO 10 ATC 20 30 O True O False MR 60 70 QUANTITY (Thousands of kits) Demand 40 80 90 100 Mon Comp Outcome Min Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for kits. at the optimal quantity for each the minimum average total cost.
- A monopolistically competitive firm in a long-run equilibrium will likely produce which of the following? A. a technically efficient amount of outputB. less than a technically efficient amount of output and less than an allocatively efficient amount of outputC. more than a technically efficient amount of output but less than an allocatively efficient amount of outputD. an allocatively efficient amount of production.E. less than a technically efficient amount of output and more than an allocatively efficient3. Below are data for a monopolistically competitive firm. Quantity $MC SAC SMR. 60 82 72 50 71 64 44 64 56 4 48 59 48 50 57.2 40 6. 52 56.3 32 7 54 56 24 60 56.5 16 a. Refer to the information above to answer this question. What output will this profit-maximizing firm produce? b. Refer to the information above to answer this question. What is true if the firm is producing at the profit -maximizing outputPrice or Cost 0 Price or Cost 0 O Firm A O Firm B O Firm C Firm A O Firm D MR Quantity Firm C MR Quantity MC MC ATC ATC D D Price or Cost Price or Cost 17 Firm B Which firm is most likely monopolistically competitive in the long run? Quantity Firm D Quantity MC MC MR ATC D=MR ATC -D
- Question 4 All of these are characteristic of monopolistic competition, EXCEPT: O A. free entry and exit. O B. barriers to entry. OC. product differentiation. OD. price maker.$100 $90 MC АТС $80 $70 $60 $50 $40 $30 Demand = P $20 $10 MR $0 10 20 30 40 50 60 Output (Q) The firm shown in the diagram above is in long run equilibrium in a monopolistically competitive market. According to the graph, the Markup is Select one: а. $50 O b. $30 O c. $40 O d. $60$2.50 $2.25 MC ATC $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 --- $0.50 Demand P $0.25 MR $0.00 10 15 20 25 30 Output (Q) The firm shown in the diagram above is in long run equilibrium in a monopolistically competitive market. According to the graph, Excess Capacity is Output. units of Select one: O a. 15 O b. 20 O C. 5 O d. 10