![]() Explain what it means to say that a firm operating under monopolistic competition has excess capacity in the long run and discuss the implications of this conclusion.Explain and illustrate both short-run equilibrium and long-run equilibrium for a monopolistically competitive firm.Explain the main characteristics of a monopolistically competitive industry, describing both its similarities and differences from the models of perfect competition and monopoly.It takes 5-7 years and costs $7 - 10 billion to build a new medium-sized refinery. This suggests oil refinery is an oligopolistic market due to large capital cost. There are 149 refineries with a combined capacity of 17.6 million barrels per day. US capacity of oil refinery: US owned 301 refineries with a combinied capacity of about 18 million barrels of crude oil each day in 1982. This implies that the shoe market is global. Today, 99% of shoes sold in the US are imported, mostly from China and Vietnam. If the representative firm is losing money, some firms will exist. ![]() If the representative firm is earning a positive profit, more firms will enter. In a competitive market, the situation of positive or negative profit is not sustainable. Long Run Equilibrium of the Competitive Firm Price cannot rise above the minimum LAC in the LR.Ħ. ![]() If p AC, then the representative firm earnsĮntry continues until price falls to the minimum LAC. If p > AC, the representative firm is earning The previous SR profit maximization problem assumes If the representative firm earns a positive profit, more firms will enter the market, thereby shifting the industry supply curve to the right. However, the above equilibrium may not be sustainable in the LR. The intersection of market demand and supply curves describes price and output in the SR market equilibrium. Market Supply Curve = a horizontal summation of individual
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |