1. Profit maximization of a seller in a monopolistically competitive market Aa A
ID: 1107067 • Letter: 1
Question
1. Profit maximization of a seller in a monopolistically competitive market Aa Aa Consider a store that produces bagels in a monopolistically competitive market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the company is operating in the short run. PRICE (Dollars per bagel MC $7.00 ATC $5.00 ! … $2.00 1Demand MR 320 460 560 QUANTITY (Bagels per dayl each The profit-maximizing level of output is bagels per day at a price of output and price, the store's profit equalsExplanation / Answer
Answer to blank 1: 320
Explanation:
Profot maximization condition is MR = MC. So, at the output level of 320, MR = MC.
Answer to blank 2: $5.00
Answer to blank 3: -$640
Explanation:
Profit = TR - TC = ($5 - $7) * 320 = -$640
Answer to blank 4: negative
Answer to blank 5: more
Explanation:
Because business is shared by many firms which leads to negative profit or loss.
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