A small, local restaurant in St. Augustine, FL, serves scrambled eggs for breakfast. The market for breakfast scrambled eggs is monopolistically competitive. The following graph shows the demand, MR, MC, and ATC curve of this local restaurant. Use the graph to answer questions 3 to 7. Price (P) per plate $10 7 5 3 2 0 50 MC MR 80 100 ATC D Number of plates of scrambled eggs served per day (Q)
A small, local restaurant in St. Augustine, FL, serves scrambled eggs for breakfast. The market for breakfast scrambled eggs is monopolistically competitive. The following graph shows the demand, MR, MC, and ATC curve of this local restaurant. Use the graph to answer questions 3 to 7. Price (P) per plate $10 7 5 3 2 0 50 MC MR 80 100 ATC D Number of plates of scrambled eggs served per day (Q)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:### Question 7: Productive Efficiency in a Restaurant
**Does the economic outcome of this restaurant lead to productive efficiency, and why or why not?**
- ○ Yes, it achieves productive efficiency because the marginal benefit is equal to the marginal cost.
- ○ Yes, it achieves productive efficiency because the price is equal to the minimum of the average total cost of production.
- ○ No, it does not achieve productive efficiency because the price is not equal to the minimum of the average total cost of production.
- ○ No, it does not achieve productive efficiency because the marginal benefit is not equal to the marginal cost.
**Explanation:**
This question explores whether a specific restaurant achieves productive efficiency. Productive efficiency occurs when goods are produced at the lowest possible cost, typically where the price equals the minimum average total cost (ATC) of production. Additionally, economic considerations might also involve the point where marginal benefit equals marginal cost to ensure optimal resource allocation. The possible answers guide students to analyze different aspects of productive efficiency by evaluating the relationship between price, costs, and economic benefits.
Transcribed Image Text:A small, local restaurant in St. Augustine, FL, serves scrambled eggs for breakfast. The market for breakfast scrambled eggs is monopolistically competitive. The following graph shows the demand, MR (marginal revenue), MC (marginal cost), and ATC (average total cost) curve of this local restaurant. Use the graph to answer questions 3 to 7.
### Graph Explanation
- **Axes**:
- The y-axis represents Price (P) per plate, ranging from $0 to $10.
- The x-axis represents the Number of plates of scrambled eggs served per day (Q), ranging from 0 to 100.
- **Curves**:
- **Demand Curve (D)**: A downward-sloping blue line, indicating the relationship between price and quantity demanded.
- **MR Curve (Marginal Revenue)**: A downward-sloping orange line, starting from the same intercept as the demand curve but with a steeper slope.
- **MC Curve (Marginal Cost)**: A blue upward-sloping curve that crosses the MR curve.
- **ATC Curve (Average Total Cost)**: A U-shaped green curve, indicating the average cost per plate with varying production levels.
- **Key Points**:
- The intersection of the MR and MC curves indicates the profit-maximizing level of output and price.
- The ATC curve gives insights into the cost efficiency at different production levels.
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