Leather Feet is one of many firms that is a supplier in the market for shoes....

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Economics

Leather Feet is one of many firms that is a supplier in themarket for shoes. Leather Feetâ€™s shoes are considered to behigh-end and are known for a stylistic sensibility that sets themapart from other producersâ€™ shoes. Many firms have entered andexited the market over the past few decades but none producesexactly the same shoes as Leather Feet.
What kind of market structure best describes this shoe market?Support your answer with the relevant characteristics.
Assume that Leather Feet is currently earning positiveshort-run economic profits. On a correctly labeled diagram, showLeather Feet profit-maximizing output and price, as well as thearea representing profits.
What happens to Leather Feetâ€™s price, output, and profit in thelong-run? Explain this change in less than two sentences andillustrate it on a new diagram.
Suppose that over time stylistic differences among shoe brandsbecome more important to consumers. How would this change inattitudes affect the firmâ€™s price elasticity of demand?
At the profit maximizing price you identified in part (b), isLeather Feet producing at the efficient scale? Support your answerwith no more than two sentences.

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3.7 Ratings (414 Votes)

1 It is monopolistic competitive market Monopolisticcompetition arises when there many seller selling goods of the samenature but which are not completely identical hence the goodsvarious sellers cannot be perfect substitutes for one another Herethough there might be many producers of shoes the Shoesmanufactured by Leather Feet are distinctive high end are know fortheir stylistic sensibility which seta them apart from theircompetitors productsMonopolistic competition is a combination of monopolistic andperfect competitive market Here there are many sellers and buyerstrading with commodities that are differentiated and are notperfect substitutes for one anotherHere though many sellers are present in the See Answer

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