Scenario: Monopolistically Competitive Firm A monopolistically competitive firm's demand for its product is equal to Q = 160 - P, and its MC curve is equal to MC = 20 + 2Q.Its TC curve is as follows: TC = 20Q + Q₂ + 20.
(Scenario: Monopolistically Competitive Firm) Given the information in the scenario Monopolistically Competitive Firm, in the short run, this firm:
A)earns profits equal to $2,430.
B)incurs losses equal to $2,450.
C)earns profits equal to $0.
D)incurs losses equal to $20.

Question

Quizplus · Accepted Answer

In the short run, a monopolistically competitive firm will produce where MR = MC. MR = 160 - 2Q and MC = 20 + 2Q. Setting these equal, we get 160 - 2Q = 20 + 2Q, which implies Q = 35. Plugging this back into the demand curve, we get P = 160 - 35 = 125. Thus, the firm's total revenue is TR = P * Q = 125 * 35 = 4,375. The firm's total cost is TC = 20Q + Q₂ + 20 = 20 * 35 + 35² + 20 = 2,195. Thus, the firm's profit is π = TR - TC = 4,375 - 2,195 = 2,430.

Scenario: Monopolistically Competitive Firm a Monopolistically Competitive Firm's Demand for Its