Answer Happy

10. Comparing monopolistic competition and perfect competitionSuppose that a firm produces wool jackets in a monopolisticallycompetitive market. The following graph shows its demand curve (D),marginal revenue curve (MR), marginal cost curve (MC), and long-runaverage cost curve (LRAC). Assume that all firms in the industryface the same cost structure. Place the tan point (dash symbol) onthe graph to indicate the long-run monopolistically competitiveequilibrium price and quantity for this firm. Next, place thepurple point (diamond symbol) to indicate the point at which thisfirm would produce in the long run if it operated in a perfectlycompetitive market. Note: Dashed drop lines will automaticallyextend to both axes. Monopolistic Competition Outcome PerfectCompetition Outcome 0 10 20 30 40 50 60 70 80 90 100 100 90 80 7060 50 40 30 20 10 0 PRICE, COSTS, AND REVENUE (Dollars per jacket)QUANTITY (Thousands of jackets per month) MC LRAC D MR Compare theaverage cost and the output in the long-run equilibrium for amonopolistically competitive firm and a perfectly competitive firmby completing the following table. Under... Average Cost Output(Dollars per jacket) (Thousands of jackets per month) MonopolisticCompetition Perfect Competition Because this market ismonopolistically competitive, the firm's average cost in long-runequilibrium is the long-run average cost it would achieve as a firmoperating in a perfectly competitive market. The output of amonopolistically competitive firm in long-run equilibrium is theoutput of a perfectly competitive firm. This difference in outputis known as the of a monopolistically competitive firm.