10090Mon Comp Outcome8070Min Unit Cost6050ATC40302010MCMRDemand102030405080708090100QUANTITY (Thousands of shirts)Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact thatv at theoptimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium isv the efficient scale.True or False: This indicates that there is a markup on marginal cost in the market for shirts.O TrueO FalseMonopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of theexternality implies that there is too much entry of new firms in the market.PRICE (Dollars per shirt) 4. Is monopolistic competition efficient?Suppose that a firm produces polo shirts in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue(MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve.Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost.(?10090Mon Comp Outcome807060Min Unit Cost50ATC40302010MCMRDemand102030405060708090100QUANTITY (Thousands of shirts)PRICE (Dollars per shirt)

In monopolistic competition, profit is maximized at a point where marginal revenue is equal to…

100 90 Mon Comp Outcome 80 70 Min Unit Cost 60 50 ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 80 70 80 08 100 QUANTITY (Thousands of shirts) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that v at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is v the efficient scale. True or False: This indicates that there is a markup on marginal cost in the market for shirts. O True O False Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the externality implies that there is too much entry of new firms in the market. PRICE (Dollars per shirt)

100 90 Mon Comp Outcome 80 70 Min Unit Cost 60 50 ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 80 70 80 08 100 QUANTITY (Thousands of shirts) Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that v at the optimal quantity for each firm. Furthermore, the quantity the firm produces in long-run equilibrium is v the efficient scale. True or False: This indicates that there is a markup on marginal cost in the market for shirts. O True O False Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. The presence of the externality implies that there is too much entry of new firms in the market. PRICE (Dollars per shirt)

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Monopolistic Competition

Section: Chapter Questions

Problem 5PA

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Make a case for why monopolistically competitive industries never reach long-run equilibrium.
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