XYZ Corporation Is a Monopolistic Competitor

question 23

Essay

XYZ Corporation is a monopolistic competitor.It has fixed costs of $1,000
per month and a constant marginal cost of $1 per unit of production.
A) Will it earn a monopoly profit if it produces 1,000 units and sells each
for $1.50?
B) Suppose the demand curve facing XYZ Corporation shifts to the right, so
it now can sell 2,000 units at $1.50 each.Will it now earn a monopoly
profit?
C) Why might XYZ's demand curve shift to the right?
D) What must XYZ do to find its short­run equilibrium price and quantity?

• A) Will it earn a monopoly profit if it produces 1,000 units and sells each
• for $1.50?
• B) Suppose the demand curve facing XYZ Corporation shifts to the right, so
• it now can sell 2,000 units at $1.50 each.Will it now earn a monopoly
• profit?
• C) Why might XYZ's demand curve shift to the right?
• D) What must XYZ do to find its short­run equilibrium price and quantity?

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