For the Monopolistically competitive firm above, determine whether we are depict
ID: 1222826 • Letter: F
Question
For the Monopolistically competitive firm above, determine whether we are depicting the short or long run, and why? Fill in the table through the Profit column. (You do not need to reproduce the table. Using column 1 for example, you can report the values as follows: Q=0,2,4,6,8,10,12,14) Use the MR-MC rule to determine and report the profit-maximizing output level, the level of maximum profits and the price to be changed by this firm. You may estimate these values giving the correct rationale. Note that in the table the change in Q each time is 2 units, not 1 unit. Will these profits persist and continue to be earned over time for the monopolistic competitor? Why or why not? Explain your answer. In full sentence in a short paragraph compare and contrast a monopolistically competitive firm and a perfectly competitive firm. Develop at least four points, at least one contrast and one similarity.Explanation / Answer
The firm is in short run as slope of MC is greater than MR at their intersection.
The column is filled as follows:
The following formulas have been used above:
TR = P*Q; MR = change in TR / change in Q; MC = change in TC/change in Q.
and Profit = TR-TC
MR-MC rule state that equilibrium occur where MR meets MC. From above table it s clear that MR and MC are most near at 10 units. Hence 10 units will be produced and will be sell at $40 from which $260 profit will be earned.
IN long run its not necessary that super normal profit will persisit but normal profit will be there.
In monopolistic market firm is price maker but in perfect competition irm is price taker and industry is price maker. Goods are homogenous in perfect market unlike monopolistic market where goods are hetrogenous in nature. Large number os sellers and buyers exist in both markets. Supernormal profit may persist in monopolistic market but in perfect competition only normal profit exist in long run.
Q P TR MR TC MC Profit 0 60 0 0 4 0 -4 2 56 112 56 20 8 92 4 52 208 48 44 12 164 6 48 288 40 72 14 216 8 44 352 32 104 16 248 10 40 400 24 140 18 260 12 36 432 16 180 20 252 14 32 448 8 224 22 224