You Are the Manager of a Monopolistically Competitive Firm

question 108

Essay

You are the manager of a monopolistically competitive firm.The present demand curve you face is P = 100 - 4Q.Your cost function is C(Q)= 50 + 8.5Q².
a.What level of output should you choose to maximize profits?
b.What price should you charge?
c.What will happen in your market in the long run?

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Definitions:

Shortage

A situation in which demand for a good or service exceeds its supply in a market.

Equilibrium

Equilibrium is the state in a market where the quantity supplied equals the quantity demanded, resulting in market stability and no incentive for price changes.

Minimum Wage

The lowest legally permissible wage that employers can pay their employees, intended to protect workers from unduly low pay.

Labor Shortage

A situation in which employers are unable to fill vacancies with qualified candidates, often due to a lack of available workers or skills in the labor market.