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Homework answers / question archive / The followinggraph shows the long-rmequilibrium for Arwin Bhd Price MO 18-1 15 -- 10 Output 10 20 a Calculate the profit maximizing price and output (2 marks) b) Arwin Bhd is operating in a market (2 marks) Calculate the profit earned by the firm and explain the type of profit
The followinggraph shows the long-rmequilibrium for Arwin Bhd Price MO 18-1 15 -- 10 Output 10 20 a Calculate the profit maximizing price and output (2 marks) b) Arwin Bhd is operating in a market (2 marks) Calculate the profit earned by the firm and explain the type of profit. (3 marks) d) Give TWO (2) of this type of market structure. 000 (2 marks) (Total: 10 Marks)
The above graph shows the long-run equilibrium for Arwin Bhd.
a) Calculate the profit maximizing price and output
b) Arwin Bhd is operating in a ___________ market.
c) Calculate the profit earned by the firm and explain the type of profit.
d) Give Two (2) of this type of market structure.
Answer 1a : Profit maximizing level of output and price level is that where the firm has earnings maximum profit as follows
where MR =MC.
Therefore, output level is 10 units where as price charged is $18
b : Arwin Bhd is operating in a monopolistic market because in this case firm is earnings a profit and new firm has been entered in the business.
C : Profit earned by the firm = $3×10=$30 as it means that abnormal profit has been earned in the business and it has chance of entry new firms in the market structure in a logical manner.
Normal profit has been achieved by the monopolistic firm in the long run because there are no barriers to entry , firms produced differentiated product and therefore they are not price takers and they have inelastic demand.
D : Two characteristics of the monopolistic competition are :
