Manolo blahnik producing at the efficient scale

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Reference no: EM131387150

Monopolistic Competition: Manolo Blahnik is one of many firms that is a supplier in the market for shoes. Manolo Blahnik is run by a fashion designer, his shoes are considered to be high-end and are known for a stylistic sensibility that sets them apart from other producers’ shoes.

a. Assume that Manolo Blahnik is currently earning short-run economic profits. On a correctly labeled diagram, show Manolo Blahnik’s profit-maximizing output and price, as well as the area representing profit.

b. What happens to Manolo Blahnik’s price, output, and profit in the long-run? Explain this change in less than two sentences and illustrate it on a new diagram.

c. At the profit maximizing price you identified in part (b), is Manolo Blahnik producing at the efficient scale?

Reference no: EM131387150

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