What price will the monopolistically competitive firm charge

What price will the monopolistically competitive firm charge in this market?

a. $15

b. $400

c. $500

d. $700

At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

a. $6,000.

b. $9,000.

c. $10,500.

d. $12,500.

The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

a. $1,500.

b. $6,000.

c. $10,500.

d. $12,500.

Which of the following will occur in the long run in this industry?

a. Firms will exit this industry.

b. Firms will enter this industry.

c. This firm will continue to earn positive economic profits.

d. This firm will incur losses.

Figure 5 1000 900 800 700 600 500 400 300 200 100 ATC MC MR 5 10 15 20 25 30 35 40 Quantity

Solution

Q1. Answer is d. $ 700. Explanation: Equilibrium point is at 15 quantity where MR=MC. The perpendicular drawn to Demand curve to know the price. Q2. Answer is c. $ 10500. Explanation: Equilibrium demand: 15 units Equilibrium price; 700 Total revenue: 15 units @700 = 10500 Q3. Answer is a. $ 1500 Explanation: ATC: 600 AR = 700 Profit per unit: 700-600 = 100 Total profits: 15 units@100 = 1500 Q4. Answer is b. The firms will enter the industry