The Monopolistically Competitive Firm In The Diagram Is

In the short run both under monopoly and monopolistic competition the firm can enjoy super normal profits normal profits or can sustain losses. As a single firm regulates the whole market there is no difference between firm and industry in the monopoly.

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B faces a downward sloping demand curve for its product.

The monopolistically competitive firm in the diagram is. Therefore the equilibrium is at qm pm. The perfectly competitive firm is both allocatively efficient because price mc and productively efficient because the equilibrium output occurs at a level where mc ac. A monopolistically competitive firm might be said to be marginally inefficient because the firm produces at an output where average total cost is not a minimum.

On the other hand in monopolistic competition there is an unrestricted entry into and exit from the industry. If you look at the other diagram though. Monopoly diagram short run and long run.

A monopolistically competitive firm is producing at an output level in the short run where average total cost is 350 price is 300 marginal revenue is 150 and marginal cost is 150. Point m this diagram shows how a monopoly is able to make supernormal profits because the price ar is greater than ac. Profit maximisation occurs where mrmc.

The bottom of the ac curve. The greater the degree of product variation the lesser is the excess capacity problem. But in the long run firm under monopolistic competition will enjoy only normal profits.

So it is a single firm industry. Comparisons with the efficient structure of perfect competition. Short run profits and losses and long run equilibrium.

Hence monopolistically competitive firms maximize profits or minimize losses by producing that quantity where marginal revenue equals marginal cost both over the short run and the long run. Key differences between monopoly and monopolistic competition. The monopolistically competitive firm illustrated in the diagram exhibits productive inefficiency because its profit maximizing output is not at the intersection of marginal cost and average total cost.

A monopolistically competitive market is productively inefficient market structure because marginal cost is less than price in the long run. Usually supernormal profit attracts new firms to enter the market but there are barriers. The excess capacity problem means that monopolistically competitive firms typically produce at some point on the rising segment of their average total cost curve.

The greater the degree of product variation the greater is the excess capacity problem. A profit maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market a has no barriers to entry.

Solved Draw A Diagram Depicting A Firm In A Monopolistically C