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When a second firm enters a monopolist’s market?

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When a second firm enters a monopolist’s market: Market price will drop. The quantity produced by the firs firm will decrease. The first firm’s average cost will increase.

When a second firm enters a market the original firm’s profits decline because?

When a second firm enters a market, the original firm’s profits decline because: the original firm’s price decreases, the original firm’s ATC increases, and the original firm’s quantity decreases. Suppose you operate in a monopolistically competitive market.

When new firms enter a monopolistically competitive industry the market?

The monopolistically competitive firm’s long‐run equilibrium situation is illustrated in Figure . The entry of new firms leads to an increase in the supply of differentiated products, which causes the firm’s market demand curve to shift to the left.

What would happen to the profits of a monopolist if another competitor enters the market quizlet?

When a second firm enters a monopolist’s market: the first firm’s profits will decrease. When a few firms sell similar products in a market, the market structure is most likely to be: an oligopoly.

Which of the following is an example of a monopolistically competitive firm?

One example of monopolistic competition is hairdressing. There are many firms which offer a slightly differentiated service, whilst competition is equally strong. A market that has a Monopolistic structure can be seen as a mixture between a monopoly and perfect competition.

Survival of Small Firms in Markets

19 related questions found

What are the five characteristics of monopolistic competition?

The main features of monopolistic competition are as under:
  • Large Number of Buyers and Sellers: There are large number of firms but not as large as under perfect competition. …
  • Free Entry and Exit of Firms: …
  • Product Differentiation: …
  • Selling Cost: …
  • Lack of Perfect Knowledge: …
  • Less Mobility: …
  • More Elastic Demand:

What are three examples of monopolistically competitive markets?

Examples of monopolistic competition
  • The restaurant business.
  • Hotels and pubs.
  • General specialist retailing.
  • Consumer services, such as hairdressing.

What price should this firm charge to maximize profit?

To maximize profits, the firm should set marginal revenue equal to marginal cost. Given the fact that this firm is operating in a competitive market, the market price it faces is equal to marginal revenue. Thus, the firm should set the market price equal to marginal cost to maximize its profits: 9 = 3 + 2q, or q = 3.

What happens when a profit-maximizing firm in a monopolistically competitive market is in long run equilibrium?

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity, … it will be earning positive economic profits. d. its demand curve will be tangent to its average-total-cost curve.

When an industry has many firms the industry is group of answer choices?

Question: When an industry has many firms, the industry is a an oligopoly if the firms sell diífferentiated products, but it is monopolistically competitive if the firms sell identical products.

What happens when another firm enters a monopoly?

If one monopolistic competitor earns positive economic profits, other firms will be tempted to enter the market. … As more firms enter the market, the quantity demanded at a given price for any particular firm will decline, and the firm’s perceived demand curve will shift to the left.

What is free entry and exit?

Free entry is a term used by economists to describe a condition in which can sellers freely enter the market for an economic good by establishing production and beginning to sell the product. Along these same lines, free exit occurs when a firm can exit the market without limit when economic losses are being incurred.

Why do competitive firms make zero profit?

Firms in perfect competition make zero economic profits in the long run due to freedom of entry by other firms. Economic profit is the difference between the total revenue received by the firm from the sale of goods in demand and the opportunity costs of all goods and services used by the firm.

Which of the following is a reason why a firm would not engage in price discrimination group of answer choices?

The main reason firms cannot price-discriminate under perfect competition is because: firms are price-takers and cannot set prices for their goods.

Is a monopolistically competitive firm Allocatively efficient?

A monopolistically competitive firm is not allocatively efficient because it does not produce where P = MC, but instead produces where P > MC. Thus, a monopolistically competitive firm will tend to produce a lower quantity at a higher cost and to charge a higher price than a perfectly competitive firm.

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms? Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning. … Market price is greater than marginal cost.

When a monopolistically competitive firm raises its price?

If a monopolistic competitor raises its price, it will not lose as many customers as would a perfectly competitive firm, but it will lose more customers than a monopoly would. At a glance, the demand curves faced by a monopoly and monopolistic competitor look similar-that is, they both slope down.

Which firm has the least control over price?

A firm in a perfectly competitive market has the least control over price. A firm’s power over price depends on the following features: The number…

What is the profit maximizing rule for a monopolistically competitive firm?

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC-and price is higher than marginal revenue, not equal to it because the demand curve is downward sloping.

At what price will the monopolist maximize his profit?

The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.

At what level of output does the firm maximize profit?

The profit-maximizing choice for a perfectly competitive firm will occur at the level of output where marginal revenue is equal to marginal cost-that is, where MR = MC. This occurs at Q = 80 in the figure.

How does a firm determine which level of output to produce to maximize profit?

The monopolist’s profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive firm uses to determine its equilibrium level of output.

What are the 4 conditions of monopolistic competition?

Monopolistic competition is a market structure defined by four main characteristics: large numbers of buyers and sellers; perfect information; low entry and exit barriers; similar but differentiated goods.

What are some real life examples of perfect competition?

3 Perfect Competition Examples
  • Agriculture: In this market, products are very similar. Carrots, potatoes, and grain are all generic, with many farmers producing them. …
  • Foreign Exchange Markets: In this market, traders exchange currencies. …
  • Online shopping: We may not see the internet as a distinct market.

Do perfectly competitive firms have competitive Behaviour?

A perfectly competitive firm is known as a price taker because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market. If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of its sales to competitors.