# ECON205 Homework09 S09

Satisfactory Essays
6135 Words
Grammar
Plagiarism
Writing
Score
ECON205 Homework09 S09
~.

Conditions fo, monopolistic competition
Consider the monopolistically competitive market structure, which has some features of perfect competition and some features of monopoly.
A monopolistically competitive market has the following attributes: product differentiation, free entry, and many sellers

".
Close

Explanation:

A

Monopolistic competition has the attribute that there are many firms competing for the same group of customers.
Similar to monopolists, firms under monopolistic competition are not price takers. Rather, they face a downward-sloping demand curve for their product. Profit for each firm is driven to zero in the long run as the demand for each firm's product adjusts with the entry and exit of other firms.

Scores:

Average: 1 /1
~~,.,.....,.---.."""",,~

Next Question

2. Profit maximization of a seller in a monopolistically competitive market
Consider a shop that produces bagels in a monopolistically competitive market. The graph below shows its demand curve (labeled Demand){ marginal revenue curve (labeled MR){ marginal cost curve (labeled MC), and average total cost curve (labeled ATC). Assume that the company is operating in the short run.

DOLLARS (Dollars per bagell

Me

\$7.00

~-----/
ATC

\$5.50
\$5.00

\$3.80

\$2.00

Demand

MR
480

690

840

QUANTITY [Bagels per dayl

The profit-maximizing

level of output is

480 '"

bagels per day at a price of

\$5.00 '"

each.
Close

Explanation:

A

Similar to a monopolist, the shop will produce up to the point where marginal cost equals marginal revenue. The intuition behind this is identical-the

shop will continue to produce as long as the additional revenue gained from

producing another unit (marginal revenue) exceeds or exactly equals the additional cost of producing that unit
(marginal cost). This occurs at 480 bagels, and the corresponding price on the demand curve equals \$5.00 per bagel.

At the profit-maximizing

output and price,

## You May Also Find These Documents Helpful

• Satisfactory Essays

4. Monopolistic competition has few to many competitors and is a little difficult to enter the business because the goods and services they have to offer are similar products to the competitors but differentiated by the brand name and price. The individual firms have some control over the prices, examples of goods and services they offer are sports wear which look the same but have different prices depending on the brand names, local fitness center, etc.…

• 574 Words
• 3 Pages
Satisfactory Essays
• Better Essays

The perfectly competitive firm faces a demand curve that is horizontal at the prevailing market price. This is the result of firms in the industry producing a commodity. No individual firm would want to raise its price above its competitors priceswhich is the market price. If it raised them, its customers would switch all of their purchases to competing firms, and the first firms sales would drop to zero.…

• 2887 Words
• 7 Pages
Better Essays
• Good Essays

Explain the marginal revenue and marginal cost approach to profit maximization and use it to describe profit, loss, and shut down situations for the purely competitive firm.…

• 8346 Words
• 34 Pages
Good Essays
• Good Essays

Marginal Revenue is Less Than Price – the firm can only increase its sales by charging a lower price thus causing marginal revenue to be less than price…

• 681 Words
• 3 Pages
Good Essays
• Satisfactory Essays

 Monopoly 1) One seller - many buyers ) y y 2)One product (no good substitutes) 3)Barriers to entry…

• 1247 Words
• 5 Pages
Satisfactory Essays
• Satisfactory Essays

in the market. If the price consumers pay for a product is greater than the marginal cost…

• 292 Words
• 2 Pages
Satisfactory Essays
• Powerful Essays

12/18/13 Monopoly - Wikipedia, the free encyclopedia Monopoly From Wikipedia, the free encyclopedia A monopoly (from Greek monos μόνος (alone or single) + polein πωλεῖν (to sell)) exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).[2] Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.[3] The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller.…

• 9377 Words
• 38 Pages
Powerful Essays
• Good Essays

In each of the examples above, the producer will demand an additional unit of a resource as long as its marginal revenue exceeds its marginal cost.…

• 2397 Words
• 10 Pages
Good Essays
• Powerful Essays

A market structure dominated by a small number of large firms, selling either identical or differentiated products, and significant barriers to entry into the industry.…

• 1800 Words
• 7 Pages
Powerful Essays
• Good Essays

It can be seen from the diagram that up till OM output, marginal revenue is greater thanmarginal cost, but beyond OM the marginal revenue is less than marginal cost.Therefore, the monopolist will be in equilibrium at output OM where marginal revenue isequal to marginal cost and the profits are the greatest.The corresponding price in thediagram is MP’ or OP.It can be seen from the diagram at output OM, while MP’ is the average revenue, ML is the average cost, therefore, P’L is the profit per unit.Now the total profit is equal to…

• 407 Words
• 2 Pages
Good Essays
• Better Essays

Monopolists tend to produce a limited number of product which are then sold at a high price (there is no need to compete). (Control of demand)…

• 834 Words
• 4 Pages
Better Essays
• Powerful Essays

Finally, Competition can be occur on different dimensions, like price, product features, support services, delivery time and brand image…

• 1417 Words
• 6 Pages
Powerful Essays
• Satisfactory Essays

Marginal cost- of a good or service is the opportunity cost of producing one more unit of it…

• 699 Words
• 4 Pages
Satisfactory Essays
• Powerful Essays

In a duopolistic market structure the companies that have a duopoly reap the full benefits of controlling the price and output in the market. But this makes it very difficult other companies to enter the market or survive in the long run…

• 1838 Words
• 8 Pages
Powerful Essays
• Good Essays

Competition occurs when two or more organizations act independently to supply their products to the same group of consumers.…

• 772 Words
• 4 Pages
Good Essays