Question

IN YOUR OWN WORDS PLEASE. 1. How does the demand curve faced by a monopolistically competitive...

IN YOUR OWN WORDS PLEASE.

1. How does the demand curve faced by a monopolistically competitive firm differ from that faced by a pure monopoly firm?

2. What happens to efficiency and capacity when monopolistically competitive firms produce where their ATC meets the demand curve? (Name and explain the specific concepts.)

Homework Answers

Answer #1

1. The monopoly is the only firm in the market. Therefore, the demand curve faced by a monopoly is the market demand curve and it is downward sloping. However, since there are no substitute products, the demand curve faced the monopoly is highly inelastic.

The demand curve faced by a monopolistic firm is also downward sloping. However, in monopolistic competition, there are many firms and buyers have options to buy from other sellers i.e. there is the presence of substitutes. Therefore, the demand curve faced by the monopolistic firm is relatively elastic.

Therefore, even though both these firms face a downward sloping demand curve, the demand curve faced by the monopoly is steeper as the demand is more inelastic and the demand curve faced by the monopolistic firm is flatter as demand is more elastic.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
(a) Why does a typical monopolistically competitive firm face a downward-sloping demand curve and explain with...
(a) Why does a typical monopolistically competitive firm face a downward-sloping demand curve and explain with good examples? [3 marks] (b) What is meant by the term "excess capacity" as it relates to monopolistically competitive firms and explain with good examples? [7 marks]
16) Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is...
16) Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is a) more elastic because there are many close substitutes for the product of a monopolistically competitive firm. b) less elastic because monopolistically competitive firms produce similar, but not identical, products. c) just as elastic because there are many sellers in both markets. d) more elastic because in the long run, the demand curve is tangent to the firm's average total cost curve.
A monopolistically competitive firm faces the inverse demand curve P = 100 – Q,and its marginal...
A monopolistically competitive firm faces the inverse demand curve P = 100 – Q,and its marginal cost is constant at $20. The firm is in long-run equilibrium. a.Graph the firm's demand curve, marginal revenue curve, and marginal cost curve. Also, identify the profit-maximizing price and quantity on your graph. b.What is the value of the firm's fixed costs? c.What is the equation for the firm's ATC curve? d.Add the ATC curve to your graph in part a please actually graph...
1. A distinguishing characteristic of monopolistically competitive market is A. price discrimination B. differentiated products C....
1. A distinguishing characteristic of monopolistically competitive market is A. price discrimination B. differentiated products C. having long-run economic profits D. having short-run economic losses 2. The Nash equilibrium in a duopoly market would result in A. An equilibrium price higher than the "monopoly price" but a lower equilibrium quantity compared to the " monopoly quantity" B. An equilibrium price higher than a competitive price but a lower equilibrium quantity compared to a monopoly quantity C. an equilibrium quantity higher...
The demand curve facing a firm will be more elastic, a. the fewer the number of...
The demand curve facing a firm will be more elastic, a. the fewer the number of competing firms b. the more differentiated the product c. the more substitutes there are for its product d. the greater the firm's ability to control price Because of easy entry, monopolistically competitive firms will             a.         produce at the lowest ATC.             b.         charge a price equal to MC.             c.         earn an economic profit equal to zero in the long run.             d.        ...
You are the manager of a monopolistically competitive firm. The demand curve you face is P...
You are the manager of a monopolistically competitive firm. The demand curve you face is P = 100 – 3Q. Your total cost function is C(Q) = 50 + 7Q2. Hence, we know that MR = 100 – 6Q, and that MC = 14Q. What is the fixed cost? What level of output should you choose to maximize profit? What price should you charge? What is profit? What will happen in your market (your firm, other firms, etc.) in the...
Which of the following is most likely produced in a monopolistically competitive market? a. Automobiles b....
Which of the following is most likely produced in a monopolistically competitive market? a. Automobiles b. Wheat c. Oil d. Fast food e. Soybeans Oligopolists are more sensitive to the pricing and output policies of their rivals when: a. there are many firms in the industry. b. all firms produce identical products. c. there are barriers to entry. d. there is freedom of entry and exit. e. their products are highly differentiated. It is harder to explain the behavior of...
In your own words, explain the difference between a movement along the demand curve and a...
In your own words, explain the difference between a movement along the demand curve and a shift in demand. Then, provide an example from your own personal life where you have experienced each one.
1. Compared with a perfectively competitive market a monopoly is inefficient because                    a. it raises...
1. Compared with a perfectively competitive market a monopoly is inefficient because                    a. it raises the market price above marginal cost and produces a smaller output.             b. it produces a greater output but charges a lower price.             c. it produces the same quantity while charging a higher price.             d. all surplus goes to the producer.             e. it leads to a smaller producer surplus but greater consumer surplus. 2. The demand curve of a monopolist typically...
13-For the perfectly competitive broccoli producers in California, the FIRM’s demand curve for broccoli is a...
13-For the perfectly competitive broccoli producers in California, the FIRM’s demand curve for broccoli is a horizontal line. downward sloping. nonexistent. upward sloping. Flag this Question Question 14 A firm maximizes its profit by producing the amount of output such that marginal revenue equals marginal cost. revenue exceeds marginal cost. revenue is maximized. cost is minimized. Flag this Question Question 15 For a perfectly competitive firm, the shutdown point (the point at which it is better to quit operating rather...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT