Family Diner ATC MC 18. Consider the monopolistically competitive firm above. It
ID: 1110182 • Letter: F
Question
Family Diner ATC MC 18. Consider the monopolistically competitive firm above. It will sell: a. Qi at the price of Pi b. c. Qi at the price of Ps d. Qr at the price of Ps Q2 at the price of P2 Consider the monopolistically competitive firm above. a. It is making profits so close substitutes will enter its market. b. It is making losses so close substitutes will enter its market. c. It is making profits so close substitutes will exit its market. 19. d. It is making losses so close substitutes will exit its market. Consider the monopolistically competitive firm above. In the long run: a. b. Its losses will rise. c. Its losses will be unchanged. d. Its profits will be zero. 20. Its profits will rise.Explanation / Answer
18. a) Q1 at the price of P1.
Monopolistic firm will produce quantity where MR = MC and set price where intersection of MR and MC curve meets the demand curve.
19. a) It is making profits so close substitutes will enter its market.
Firms are making profit at price of P1 because cost is P2 which is less than P1, so new firms will enter into the market.
20. d) Its profits will be zero.
In longrun, new firms will enter into the market and reduces profit to zero.
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