need immediate help with these two pages firm, We Do Hair, is in a monopolistica

Question

need immediate help with these two pages

firm, We Do Hair, is in a monopolistically competitive industry, Its cost and revenue curves are as shown in the diagram below Demand and cost cond itions for Wa Do Helr st MC 32 28 24 20 ATC MR 40 46 50 60 Number of pema 22. If We Do Hair does per week it will maximize its profit. a. 40 b. 46 c 50 60 How many permas would the firm in the previous problem have to efficiency? 8. 40 b. 46 . 50 d. 60 23. 23. How many perms would the firm in the presious problem have to produce in onder to firm in the previous problem have to produce in order to achieve allocative 24. For a monopolistically competitive firm in long un equilibrium at the profit-maximizing quantity, the the average total cost curve. demand curve must be a. above b. below c. twice the value of d. tangent to 25. In the long run, a monopolistically competitive industry achieves allocative efficiency. achieves productive efficiency. has zero economic profit. all of the above. a. b. c. d. 26. Which of the following is the best example of a monopolistically competitive industry? a. computer operating systems b. wheat c. convenience stores in a large city d. a patented drug to treat diabetes

Explanation / Answer

1) The monopolistically competitive firm maximizes profit by producing the quantity of output associated with marginal revenue equals marginal cost.

The profit in this case is maximized at 40.

2) Allocative efficiency occurs when a good is produced at a level that maximizes social welfare. This occurs when a product's price equals its marginal benefits, which is also equal to the product's marginal costs. Again, since a good's price in a monopolistic competitive market always exceeds its marginal cost, the market can never be allocatively efficient.

From the above data we can conclude it as 50.

3) The demand curve for an individual firm is downward sloping in monopolistic competition, in contrast to perfect competition where the firm's individual demand curve is perfectly elastic. This is due to the fact that firms have market power: they can raise prices without losing all of their customers. In this type of market, these firms have a limited ability to dictate the price of its products; a firm is a price setter not a price taker (at least to some degree). The source of the market power is that there are comparatively fewer competitors than in a competitive market, so businesses focus on product differentiation, or differences unrelated to price. By differentiating its products, firms in a monopolistically competitive market ensure that its products are imperfect substitutes for each other. As a result, a business that works on its branding can increase its prices without risking its consumer base.

However, In the long-run, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm's average total cost curve. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even.
So it should be tangent to the ATC curve.

4) In the long-run, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm's average total cost curve. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even.

Economic profit will be zero.

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