livvj01
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Hey everyone,

If anyone can help me with these questions that would be great

1. How does equilibrium in the market lead to an efficient allocation of resources
2. How an increase in costs of production can lead to an increase in total revenue
3. Why monopolistically competitive firms are more likely to be dynamically efficient despite only earning normal profit in the long run

Thanks
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Sinnoh
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Moved to Economics study help.

You're more likely to get a response if you post in the correct sub-forum.
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jpt4749
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1. Being at equilibrium means there is no excess supply or demand which mean the resources are fully allocated to everyone in market perspective.

2. If this rise in the cost is less than the benefit perceived by customers they will be willing to pay more for extra quality and the firm can create the competitive advantage by building a benefit leadership.

3. Monopolistic competition has no or low entry barriers so after new firms enter the industry the demand curve for individual will shift downward and this will eliminate the deadweight loss arising from being a monopolist
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livvj01
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(Original post by Nathan9087)
1. Being at equilibrium means there is no excess supply or demand which mean the resources are fully allocated to everyone in market perspective.

2. If this rise in the cost is less than the benefit perceived by customers they will be willing to pay more for extra quality and the firm can create the competitive advantage by building a benefit leadership.

3. Monopolistic competition has no or low entry barriers so after new firms enter the industry the demand curve for individual will shift downward and this will eliminate the deadweight loss arising from being a monopolist
Thank you so much this is so helpful !
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jpt4749
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(Original post by livvj01)
Thank you so much this is so helpful !
Glad to help my friend
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15writers
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1. When the markets are in equilibrium, marginal costs and price of the product or service are equal. This means that the extent to which consumers value the product or service is exactly the same as the total sum of all resources required for production of this product. Hence, the resources are efficiently allocated. 2. An increase in costs of production can lead to an increase in total revenue if the producer raises the prices. The supply curve will move to the left in response to the increase in production costs. This will lead to a reduction of quantity of products supplied and an increase in the product price, all else being equal. 3. Monopolistically competitive firms are more likely to be dynamically efficient despite only earning normal profits in the long run because product differentiation is closely associated with innovations. Through innovations, monopolistically competitive firms manage to move their long-term average costs downwards.
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livvj01
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(Original post by 15writers)
1. When the markets are in equilibrium, marginal costs and price of the product or service are equal. This means that the extent to which consumers value the product or service is exactly the same as the total sum of all resources required for production of this product. Hence, the resources are efficiently allocated. 2. An increase in costs of production can lead to an increase in total revenue if the producer raises the prices. The supply curve will move to the left in response to the increase in production costs. This will lead to a reduction of quantity of products supplied and an increase in the product price, all else being equal. 3. Monopolistically competitive firms are more likely to be dynamically efficient despite only earning normal profits in the long run because product differentiation is closely associated with innovations. Through innovations, monopolistically competitive firms manage to move their long-term average costs downwards.
Thank you so much !
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