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Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand curve, marginal-revenue curve (MR), marginal-cost curve (MC), and average-total-cost curve (ATC). Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss. Monopolistically Competitive Outcome Profit or Loss PRICE (Dollars per bike) + MC MR 0 Demand 400 450 500 0 50 100 150 350 200 250 300 QUANTITY (Bikes) profit, which means there are Given the profit-maximizing choice of output and price, the shop is making shops in the industry relative to the long-run equilibrium. Now consider the long run in which bike manufacturers are free to enter and exit the market. Show the possible effect of this free entry and exit by shifting the demand curve for a typical individual producer of bikes on the following graph. Demand PRICE (Dollars per bike) Demand QUANTITY (Bikes) Which of the following statements are true about both monopolistic competition and monopolies? Check all that apply. Firms earn zero profit in the long run. Price equals average total cost in the long run. Firms are not price takers. Price is above marginal cost.
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