Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $13 per meal.
Instructions: Enter your answers as whole numbers.
a. What is the size of this firm's profit or loss?
b. Will there be entry or exit?
Will this restaurant's demand curve shift left or right?
c. Assume that the allocatively efficient output level in long-run equilibrium is 200 meals. In the long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $9.
What is the size of the firm's profit?
d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In the long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $9.
Is the deadweight loss for this firm greater than or less than $40?
Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $13 per meal.
Instructions: Enter your answers as whole numbers.
a. What is the size of this firm's profit or loss?
b. Will there be entry or exit?
Will this restaurant's demand curve shift left or right?
c. Assume that the allocatively efficient output level in long-run equilibrium is 200 meals. In the long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $9.
What is the size of the firm's profit?
d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In the long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $9.
Is the deadweight loss for this firm greater than or less than $40?
