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Chapter 1: Q.7 (page 9)

How does a monopolistic competitor choose its

profit-maximizing quantity of output and price?

Short Answer

Expert verified

A monopolistic competitor will find the quantity where marginal revenue is equal to marginal cost.

Step by step solution

01

Step 1. Definition

A monopoly refers to exclusive possession of a market by a supplier for which there is no substitute. At this point, the supplier is capable of establishing the price of the product without the trepidation of competition from other firms or other firms' substitutes.

02

Step 2. Explanation

A monopolist determines the profit-maximizing quantity and pricing in a monopolistic market. The monopolist rival's downward shift curve can be seen here.As a result, at the point when marginal cost and marginal revenue are equal, he chooses a combination of quantity and price, as well as the demand curve determined from it.

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Most popular questions from this chapter

Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to produce it and takes a month. If the town has a total of 100 people, what is the maximum amount of ham the residents can consume in a month?

In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? Sketch AD/AS diagrams to illustrate your answers.

a. A large increase in the price of the homes people own.

b. Rapid growth in the economy of a major trading partner.

c. The development of a major new technology offers profitable opportunities for business.

d. The interest rate rises.

e. The good imported from a major trading partner become much less expensive.

What is the relationship between product

differentiation and monopolistic competition?

What is income effect?

What point is preferred along an indifference curve?
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