Suppose that a typical firm in a monopolistically competitive industry faces a demand curve given by: q = 60 − (1/2)p, where q is quantity sold per week. The firm’s marginal cost curve is given by: MC = 60. How much will the firm produce in the short run? What price will it charge? In addition to providing the quantitative answers for the question, please also describe the approach you used to arrive at your conclusions.

Explanation:

In a monopolistic firm, demand curve = average (AR) curve. Given, q=60- (1/2)P, then the price (P) would be as below:

(1/2)P= 60-q

P= 120-2q

:

a) Quantity = 15 Units

b) Price = 90

Explanation:

First, we know we are dealing with a Monoplistically competitve firm and as such the calculations are as follows

Q = 60-(1/2)P

Therefore, 1/2 P = 60-Q

P = (60-Q)2 - First Equation

Second Equation

TR = P-Q

TR= (120-2Q)Q

TR= 120Q -2Q∧2

MR = dTR/dQ = 12- (1) - 2 x 2Q

= 120-4Q

Based on these Formula,

The Profit Maximizing Condition = MR=MC

Where Marginal Revenue = Marginal Cost

As such

120-4Q = 60

120-60 = 4Q

Q = 60/4 = 15 units

Therefore, the units to be produced in the short run = 15 units

2) The Price the firm will charge for the units produced

In order to arrive at the price, we use the price equation and substitute 15 for Q

Price Equation

P = 120 - 2(Q)

P = 120 - 2(15)

P= 120-30

P= 90

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; exemplars;