1. Suppose a monopolistic competitor in long-run equilibrium has a constant marginal cost of $6 and faces the demand curve given in the following table:
|
Q
|
P
|
MC
|
|
20
|
2
|
6
|
|
18
|
4
|
6
|
|
16
|
6
|
6
|
|
14
|
8
|
6
|
|
12
|
10
|
6
|
|
10
|
12
|
6
|
|
8
|
14
|
6
|
|
6
|
16
|
6
|
a. What output will the firm choose?
b. What will be the monopolistic competitor's average fixed cost at the output it chooses?
2. The pizza market is divided as follows: Pizza hut20.7%, Domino's 17.0, Little Caesar's6.7, Pizza Inn2.2 Round Table2.0, all others51.4,
a. How would you describe its market structure?
b. What is the approximate Herfindahl index?
c. What is the four-firm concentration ratio?