Inevitably, a firm in monopolistic competition ends up producing where its ATC curve is tangent to its demand curve. Explain.
Answer to relevant QuestionsMake the argument that consumers are better off when the economy's market structures are more competitive than monopolistic. Suppose the firm is a monopoly and its price schedule is: How many brooms would the firm produce? Would the firm be making an economic profit? What are concentration ratios? If the goal of both firms in a balanced oligopoly is to avoid ending up in a worst-case scenario, a Nash equilibrium results. Explain. Construct a payoff matrix--by picking any two firms, any set of prices, and any payoffs associated with the pricing combinations--that shows a successful tit-for-tat pricing strategy.
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