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22. Consider a monopolistically competitive market. Despite producing differentiated products, suppose that each existing firm (and any...

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Economics

22. Consider a monopolisticallycompetitive market. Despite producing differentiated products,suppose that each existing firm (and any potential entrant) has thesame total cost function, given by TC=2200+100Q+Q2. Anddespite producing differentiated products, suppose that eachexisting firm currently faces the same residual demandcurve, given by Q=(320-P)/4.5 What will happen in the market overthe long run?

      A.Number of firms will increase and residual demand of existing firmswill shift leftward.

      B.Number of firms will decrease and residual demand of remainingfirms will shift rightward.

      C.Number of firms will stay the same and residual demand of existingfirms will not change.

      D.Number of firms will increase and residual demand of existing firmswill shift rightward.

     E.   Number of firms will decrease and residual demand ofremaining firms will shift leftward.

Answer & Explanation Solved by verified expert
4.0 Ratings (592 Votes)
For each firm in the given monopolistic competition TC 2200 100Q Q2 Marginal Cost MC ddQ TC ddQ 2200 100Q Q2 0 100 1 2Q 100 2Q Q 320P45 45Q 320 P P 320 45Q    See Answer
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