FIRST ANSWER CHOICES: 800, 1080, 960 SECOND ANSWER CHOICE: $4.20, 6.00, 5.00, 3.
ID: 1197354 • Letter: F
Question
FIRST ANSWER CHOICES: 800, 1080, 960
SECOND ANSWER CHOICE: $4.20, 6.00, 5.00, 3.00, 4.50
THIRD ANSWER CHOICE: $400, 0, -300, -1600, 1600, -1200, 1200
FOURTH ANSWER CHOICE: positive, negative, zero
FIFTH ANSWER CHOICE: more, fewer, an equal number of
2. 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. DOLLARS (Dollars per bagel MC ATC $5.00 450 4.20 |- $3.00 Demand IMR 800 960 1,080 QUANTITY (Bagels per day The profit-maximizing level of output is bagels per day at a price of each At the profit-maximizing output and price, the store's profit equals Given the profit-maximizing choice of output and price, the store is making there are profit, which means that stores in the industry relative to the long-run equilibrium.Explanation / Answer
A monopolistic competetive firm maximises its profit by equating its MR with MC.Thus its profit maximising output is 800 units and profit maximising price is determined by the demand curve at 800 units of output.This is equal to $5 per piece.
At the profit maximising level firms profits are calculated as the difference between the revenue and costs.Average costs per unit at 800 units is equal to $4.50.Total revenue $5 * 800 - $4.50 * 800 = .50 * 800 = $400 profits.
Thus the store is making positive profits and hence there would be more number of firms than in the long run equilibrium.
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