Table 16-4 This table shows the demand schedule, marginal cost, and average tota
ID: 1119495 • Letter: T
Question
Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. Iarginal Cost verage Total Cost itv 50 40 32 26 S45 30 24 35 10 12 32 30 15 10 S5 S0 74 104 140 26 32 40 50 Refer to Table 16-4. Which of the following is likely to happen in the long run in this market? a. The market is currently in a long-run equilibrium. . The market price is likely to rise O c. Firms are likely to enter the market since firms are earning a positive economic profit. d Firms are likely to leave the market since firms are earning a negative economic profit.Explanation / Answer
Answer
TR=P*Q
MR of n th unit=(TR of n units -TR of p units)/(n-p)...................n>p
profit=TR-TC
The firm produces at MR=MC or the closet lower MC
Q=4, P=$30 and
profit=(P-ATC)*Q=(30-22)*4=$32
Option c
the market is in economic profit so new firms will enter the market.
Quantity Price TR MR 0 50 0 1 45 45 45 2 40 80 35 3 35 105 25 4 30 120 15 5 25 125 5 6 20 120 -5 7 15 105 -15 8 10 80 -25 9 5 45 -35 10 0 0 -45Related Questions
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