Profit Maximization for a Firm in Monopolistic Competition

Part 2 of 2 – Profit Maximization for a Firm in Monopolistic Competition

Profit Maximization for a Firm in Monopolistic Competition

 

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(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm’s fixed costs and reduces cost from ATC to ATC’ Before the innovation reduced the cost, the firm’s maximum economic profit was:

 

 

 A.$0.  
 B.$30.  
 C.$750.  
 D.$4,500.  

 

 

 

 

 

 

 

Part 2 of 2 – Profit Maximization for a Firm in Monopolistic Competition

 

Profit Maximization for a Firm in Monopolistic Competition

 

 

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition.) Suppose that an innovation reduces a firm’s fixed costs and reduces cost from ATC to ATC’ After the innovation reduced the cost, the firm’s maximum economic profit is:

 

 

 A.$0.  
 B.$30.  
 C.$1,500.  
 D.$3,000.  

 

 

 

 

Part 2 of 2 – Profit Maximization for a Firm in Monopolistic Competition

 

Profit Maximization for a Firm in Monopolistic Competition

 

 

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm’s fixed costs and reduces cost from ATC to ATC’ Suppose further that after the innovation reduced the cost to ATC?, it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be:

 

 

 A.$1,700.  
 B.$1,190.  
 C.$3,060.  
 D.$3,400.