Suppose that a typical firm in a monopolistically competitive industry faces a demand curve given by:q = 60 − (1/2)p, where q is quantity sold per week.The firm’s marginal cost curve is given by: MC = 60.1.How much will the firm produce in the short run?2.What price will it charge?In addition to providing the quantitative answers for the question, please also describe the approach you used to arrive at your conclusions.75 wordsPermalinkIn reply to Joel Almanzar (Instructor)Re: Week 5by Asia Arsalai- Saturday, 3 October 2020, 2:40 AMmonopolistically competitive firm, in the short run, make profits; will produce where marginal cost intersects marginal revenue, the price will be set where the demand curve meets the intersection point. From ATC to the demand curve is the total economic profit for the firm. Because the monopolistic firm can charge any price they want but where the marginal cost is equal to marginal revenue and the price is set accordingly with the demand curve (Rittenberg, L. and Tregarthen, T., 2009).Given in the question the demand curve is q = 60 − (1/2)p, where q is quantity sold per week.The firm’s marginal cost curve is given by MC = 60.Solving for MR=MC,Considering the demand curve= q=60-(1/2)p; p= 120-2q.The marginal revenue curve is twice steeper than the demand curve, According to Rittenberg, L. andTregarthen, T. (2009), “Because a monopolistically competitive firm faces a downward-sloping demand curve, its marginal revenue curve is a downward sloping line that lies below the demand curve, as in the monopoly model ( page.277).”Therefore,MR= 120-4q.Now solving MR=MC=> MC is constant 60, MR =MC, 120-4q=60120- 4q=60=> q=15Now substituting the q=15 into the demand function in order to get the price, p= 120- 30=$90.This means that the firm should at demand curve q=60-(1/2)p, should produce 15units with $90 price.References:Rittenberg, L. and Tregarthen, T. (2009). Chapter 11, Principles of Economics. Retrieved from: apter01.pdf262 words
PermalinkShow parentIn reply to Asia ArsalaiRe: Week 5by Matthew Colton- Sunday, 4 October 2020, 7:38 PMAsia-Nice job with this and being the first out of the blocks. Some good research and analysis.17 wordsPermalinkShow parentIn reply to Asia ArsalaiRe: Week 5by Chibuye Nsakanya- Monday, 5 October 2020, 11:27 AMExcellent research the firm will produce 15 units and the charge a price of $9015 wordsPermalinkShow parentIn reply to Asia ArsalaiRe: Week 5by Andrew Ng'ombe- Wednesday, 7 October 2020, 1:30 AMHello Asia,Great work. You have adequately explained and solved each aspect of the question.15 wordsPermalinkShow parentIn reply to Asia ArsalaiRe: Week 5by Shehla Alam- Wednesday, 7 October 2020, 6:17 AM
Hi Asia!Great work. You have well explained the topic, explaining when will a monopolistic competitive firm make profit in short run. While a monopolistic competitive firm have no profit in long run because of easy entry and exit.