The first graph below is for Chic and Sharpe Ltd., a firm in the women's garment industry, which is monopolistically competitive.
a) Label the four curves in the first graph.
b) What areas in the graph above represent: total cost: total revenue; and economic profit?
c) On the second graph below, sketch in the effect of entry by new firm's into this industry and label the new price and quantity traded as P 2 and Q 2

d) Using the average/marginal cost curves in the third graph below, sketch in the firm's new demand and marginal revenue curves that would be consistent with zero economic profits. Label the equilibrium price and quantity traded as P 2f and Q 2f
e) On the third graph indicate with Q c the capacity output for the firm.

f) What is the amount of excess capacity for this firm?

Question

The first graph below is for Chic and Sharpe Ltd., a firm in the women's garment industry, which is monopolistically competitive.
a) Label the four curves in the first graph.  
b) What areas in the graph above represent: total cost: total revenue; and economic profit?
c) On the second graph below, sketch in the effect of entry by new firm's into this industry and label the new price and quantity traded as P 2 and Q 2

d) Using the average/marginal cost curves in the third graph below, sketch in the firm's new demand and marginal revenue curves that would be consistent with zero economic profits. Label the equilibrium price and quantity traded as P 2f and Q 2f 
e) On the third graph indicate with Q c the capacity output for the firm.

f) What is the amount of excess capacity for this firm?

Quizplus · Accepted Answer

The Answer of The first graph below is for Chic and Sharpe Ltd., a firm in the women's garment industry, which is monopolistically competitive.
a) Label the four curves in the first graph.  
b) What areas in the graph above represent: total cost: total revenue; and economic profit?
c) On the second graph below, sketch in the effect of entry by new firm's into this industry and label the new price and quantity traded as P 2 and Q 2

d) Using the average/marginal cost curves in the third graph below, sketch in the firm's new demand and marginal revenue curves that would be consistent with zero economic profits. Label the equilibrium price and quantity traded as P 2f and Q 2f 
e) On the third graph indicate with Q c the capacity output for the firm.

f) What is the amount of excess capacity for this firm?

The First Graph Below Is for Chic and Sharpe Ltd