Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (SMC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. ? PRICE (Dollars per hot dog) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 30 60 Competitive Market S=MC 90 120 150 180 210 QUANTITY (Hot dogs) D 240 270 300 + PC Outcome
Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (SMC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. ? PRICE (Dollars per hot dog) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 30 60 Competitive Market S=MC 90 120 150 180 210 QUANTITY (Hot dogs) D 240 270 300 + PC Outcome
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market.
|
Market Structure
|
Price
|
Quantity
|
|---|---|---|
|
(Dollars)
|
(Hot dogs)
|
|
| Competitive |
|
|
|
|
|
Transcribed Image Text:Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the
city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power.
The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs.
Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.
(?
Competitive Market
5.0
4.5
PC Outcome
4.0
3.5
3.0
2.5
2.0
S=MC
1.5
1.0
0.5
D
30
60
90
120
150
180 210
240
270
300
QUANTITY (Hot dogs)
PRICE (Dollars per hot dog)
Transcribed Image Text:Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This
firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the
new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows
the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm.
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist.
(?
Monopoly
5.0
4.5
Monopoly Outcome
4.0
3.5
3.0
Deadweight Loss
2.5
MC
1.5
1.0
0.5
D
MR
30
60
90
120
150
180
210
240
270
300
QUANTITY (Hot dogs)
PRICE (Dollars per hot dog)
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