What is the short-run and long-run effect of increased fixed cost on monopolistic competition?

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The part of paper not shown in the picture is here:

Let's look back to the question about the annual fee assessed on Airbnb hosts we did on the midterm. Instead of assuming the market is perfectly competitive, let's invoke a more realistic assumption of monopolistic competition. a. The market for rented rooms is initially (before the fee is imposed) in long run equilibrium.

(SR= short run; LR= long run)

What is the short-run and long-run effect of increased fixed cost on monopolistic competition?
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Tutor Answer

LorettaK
School: University of Maryland

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Question (b)

(i)

Short-run effect on quantity produced by the host
With the imposition of the fixed fee, the supply curve will shift upwards and a
new equilibrium will result with a lower quantity.

(ii)

Short-run effect on profit...

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Anonymous
Thanks, good work

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