10. Problems and Applications Q5 You are hired as the consultant to a monopolist

Question

10. Problems and Applications Q5 You are hired as the consultant to a monopolistically competitive firm. The firm reports the followling information about its price, marginal cost, and average total cost of the following circumstances, indicate whether the firm can possibly be maximizing proft. If the fm is profit whether the firm is in a long-run equilibrium, (Note: If the frm cannot be maximizing profit, select "No" in the long run equilbrium column) ConditionsPossibly Maximizing Profitz Long Run Equililbrium? PATC P> MC, P ATC P>MC,P ATC Grade t Now Save & Continue Continue without saving Search the web and Windows

Explanation / Answer

The profit-maximising condition are;

Price =MC

P> ATC

The long-run equilibrium in the monopolistic competition are;

P>MC and Price = ATC.

Conditions Possibility Maximising profit Long-run equilibrium P<MC, P>ATC No No P>MC, P<ATC No No P=MC, P>ATC Yes No P>MC, P=ATC No Yes

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