Consider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitiveequilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors actas price takers and each individual vendor has no market power.The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros.Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.PRICE (Dollars per gyro)5.04.54.03.53.02.01.51.00.50010 2030Competitive Market4060QUANTITY (Gyros)507080S=MCD90 100PC Outcome(?)Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in theneighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change doesnot affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph The Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in theneighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change doesnot affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. Thefollowing graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for themonopoly vendor.Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist.PRICE (Dollars per gyro)5.04.54.03.53.01.51.00.500102030MonopolyMR4050 60QUANTITY (Gyros)70MCD80 90 100++Monopoly OutcomeDeadweight Loss(?)Consider the welfare effects that result from the industry operating as a competitive market versus a monopoly.On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by amonopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody.Deadweight loss occurs when market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive

A perfectly competitive market operates at the intersection of market demand and market supply…

Consider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.

Consider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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