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Short run and long run behavior of monopolistic competitive firms.

The Monopolistic Competition Model

a) List the four assumptions for the Monopolistic competition model.

b) Draw a diagram that shows a representative firm in a monopolistically competitive market that is experiencing short-run economic profits. Label the areas that represent total revenue, total costs, and the profit. (For simplicity, only draw the average total cost curve; you need not draw the average variable cost curve.)

c) Now elucidate how the marketplace will adjust in the long run and draw a corresponding graph for the representative firm in the long run. (describe your answer.)

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916164

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