Consider a monopolistically competitive market with N firms. Each firms business opportunities are described by the following

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Consider a monopolistically competitive market with N firms. Each firm’s business opportunities are described by the following equations:

Demand: Q = 100/N – P

Marginal Revenue: MR = 100/N – 2Q

Total Cost: TC = 50 + Q2

Marginal Cost: MC = 2Q

a. How does N, the number of firms in the market, affect each firm’s demand curve? Why?

b. How many units does each firm produce? (The answers to this and the next two questions depend on N.)

c. What price does each firm charge?

d. How much profit does each firm make?

e. In the long run, how many firms will exist in this market?

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Principles of economics

ISBN: 978-0538453042

6th Edition

Authors: N. Gregory Mankiw

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Question Posted: Dec 14, 2012 07:01 AM

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Consider a monopolistically competitive market with N firms. Each firms business opportunities are described by the following

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a As N rises the demand for each firms product falls ...View the full answer

Principles of economics

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