Use figure from the example, which shows the demand curve, marginal revenue curve, and cost curves of Lite and Kool, Inc., a producer of running shoes in monopolistic competition, to work on the problem.

In the short run, what quantity does Lite and Kool produce, what price does it charge, and does it make an economic profit?


Answered 2 years ago
Answered 2 years ago
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In the short run, the company produces at the output level where MR intersects MC. This is at 200 pairs of shoes a week.

They price is determined by the demand curve. At 200 pairs of shoes, consumers are willing to pay $75\$75, so Lite and Kool charges $75\$75 per pair.

The company makes an economic profit, because the ATC curve is under the intersection of MR and MC.

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