When economies of scale are important, imposing competition by splitting a monopolistic firm into many rival units will
a. lead to an increase in the per-unit cost of production in the industry.
b. not affect per-unit costs but will affect demand conditions.
c. generally increase the social efficiency of production.
d. cause the industry demand curve to increase (shift to the right).
A
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The figure above shows the market for coffee. If 30 pound of coffee a month are available, the ________ price that consumers are willing to pay for the last pound is ________
A) maximum; $4.00 B) minimum; $4.00 C) maximum; $2.50 D) minimum; $2.50
Refer to Figure 13-16. Figure 13-16 depicts a monopolistically competitive barber shop. Use the diagram to answer the following questions
a. Suppose the average variable cost of production is $15 when output equals 110 haircuts and $15.25 when output equals 140 haircuts. If the firm wants to maximize its profit or minimize its losses, how many haircuts will it produce and what price should it charge? Explain your answer. b. Calculate the firm's profit or loss. c. What is likely to happen in this industry over time as it moves to its new long-run equilibrium? d. Suppose the barber shop depicted in the diagram remains in the industry. Is this barber shop likely to produce this same quantity of haircuts as in part (a) in the long run?