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Lesson 03.10 Monopolistic CompetitionQuestionJack and Diane own Enviromax, a monopolistically competitive firm that recycles paperproducts. Their demand, marginal revenue, and cost curves are shown in the diagram below.1.If Enviromax wants to maximize profit, what price would they charge?2.What is their profit per unit if they are operating at the profit maximizing output?3.Assume now that the demand for recycled paper increases and that the company is earningshort-run economic profits. Relative to this short-run situation, explain what happens toprofits in the long run and why?4.In the long run, will Enviromax produce the allocatively or productively efficient level ofoutput? Explain.Answers1.Profit maximization is at the quantity where the marginal revenue equals the marginalcost. The two curves intersect each other at Quantity = 10 and going to the demandcurve at this quantity the charge $30. If Enviromax wants to maximize the price