**Exercise 5** Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, the average total cost (ATC) per meal is $10, and consumers are willing to pay $12 per meal. **Instructions:** Enter your answers as whole numbers. a. What is the size of this firm’s profit or loss? - [Answer box] b. Will there be entry or exit? - [Dropdown menu] Will this restaurant’s demand curve shift left or right? - [Dropdown menu] c. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm’s economic profit? - [Answer box] d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Is the deadweight loss for this firm greater than or less than $60? - [Dropdown menu] **Notes:** - This problem illustrates concepts in monopolistic competition, such as profit maximization, long-run equilibrium, demand curve shifts, and deadweight loss. - McGraw Hill Education is noted as the publisher of the material.
**Exercise 5** Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, the average total cost (ATC) per meal is $10, and consumers are willing to pay $12 per meal. **Instructions:** Enter your answers as whole numbers. a. What is the size of this firm’s profit or loss? - [Answer box] b. Will there be entry or exit? - [Dropdown menu] Will this restaurant’s demand curve shift left or right? - [Dropdown menu] c. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm’s economic profit? - [Answer box] d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Is the deadweight loss for this firm greater than or less than $60? - [Dropdown menu] **Notes:** - This problem illustrates concepts in monopolistic competition, such as profit maximization, long-run equilibrium, demand curve shifts, and deadweight loss. - McGraw Hill Education is noted as the publisher of the material.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![**Exercise 5**
Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, the average total cost (ATC) per meal is $10, and consumers are willing to pay $12 per meal.
**Instructions:** Enter your answers as whole numbers.
a. What is the size of this firm’s profit or loss?
- [Answer box]
b. Will there be entry or exit?
- [Dropdown menu]
Will this restaurant’s demand curve shift left or right?
- [Dropdown menu]
c. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm’s economic profit?
- [Answer box]
d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Is the deadweight loss for this firm greater than or less than $60?
- [Dropdown menu]
**Notes:**
- This problem illustrates concepts in monopolistic competition, such as profit maximization, long-run equilibrium, demand curve shifts, and deadweight loss.
- McGraw Hill Education is noted as the publisher of the material.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb1bac095-f596-4e03-ba80-5134580049fe%2F5ed1e7ba-ddf8-4664-b41e-a51c08f19a0d%2Fwful9mb.jpeg&w=3840&q=75)
Transcribed Image Text:**Exercise 5**
Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, the average total cost (ATC) per meal is $10, and consumers are willing to pay $12 per meal.
**Instructions:** Enter your answers as whole numbers.
a. What is the size of this firm’s profit or loss?
- [Answer box]
b. Will there be entry or exit?
- [Dropdown menu]
Will this restaurant’s demand curve shift left or right?
- [Dropdown menu]
c. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm’s economic profit?
- [Answer box]
d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Is the deadweight loss for this firm greater than or less than $60?
- [Dropdown menu]
**Notes:**
- This problem illustrates concepts in monopolistic competition, such as profit maximization, long-run equilibrium, demand curve shifts, and deadweight loss.
- McGraw Hill Education is noted as the publisher of the material.
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