Asked by makayla porter on Jun 23, 2024
Verified
Refer to Figure 16-8. If this firm were operating in a perfectly competitive market in the long run, it would charge a price equal to point
A) I but in a monopolistically competitive market, the profit-maximizing price is C.
B) E but in a monopolistically competitive market, the profit-maximizing price is C.
C) C but in a monopolistically competitive market, the profit-maximizing price is G.
D) G but in a monopolistically competitive market, the profit-maximizing price is J.
Profit-maximizing Price
The price level at which a company can sell its product to achieve the maximum possible profit, taking into account demand and production costs.
- Examine the factors that influence the balance of price and quantity in markets characterized by monopolistic competition.
- Analyze how monopolistically competitive firms use advertising to influence demand elasticity and market power.
Verified Answer
AC
Alanna ClinkscalesJun 29, 2024
Final Answer :
B
Explanation :
In a perfectly competitive market, firms charge a price equal to their marginal cost in the long run, which corresponds to the lowest point on the average total cost curve (point E). In a monopolistically competitive market, firms have some degree of market power, allowing them to charge a price above marginal cost, typically where the marginal cost curve intersects the marginal revenue curve, which is represented by point C.
Learning Objectives
- Examine the factors that influence the balance of price and quantity in markets characterized by monopolistic competition.
- Analyze how monopolistically competitive firms use advertising to influence demand elasticity and market power.
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