Imagine a circular city with a circumference of 50 miles. A total of 500 people live around the city, all of whom are evenly spaced. It costs any person 10 cents per mile to travel. Every one of these people needs to have exactly one meal prepared. The cost of preparing meals is given by C(q) = 10 + 0.5q where q is the number of meals prepared at any restaurant. (Hint: Define one unit of distance as 50 miles if that makes the problem easier.) If you were a dictator interested in the efficient way to feed the population, how many restaurants would you build? If the free market determines the number of restaurants, and the result is firms that make zero economic profit, how many firms will there be? In what sense is this model one of monopolistic competition? a. b. C.
Imagine a circular city with a circumference of 50 miles. A total of 500 people live around the city, all of whom are evenly spaced. It costs any person 10 cents per mile to travel. Every one of these people needs to have exactly one meal prepared. The cost of preparing meals is given by C(q) = 10 + 0.5q where q is the number of meals prepared at any restaurant. (Hint: Define one unit of distance as 50 miles if that makes the problem easier.) If you were a dictator interested in the efficient way to feed the population, how many restaurants would you build? If the free market determines the number of restaurants, and the result is firms that make zero economic profit, how many firms will there be? In what sense is this model one of monopolistic competition? a. b. C.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Imagine a circular city with a circumference of 50 miles. A total of 500 people live around the city, all of whom are evenly spaced. It costs any person 10 cents per mile to travel. Every
one of these people needs to have exactly one meal prepared. The cost of preparing meals is given by C(q) = 10 + 0.5q where q is the number of meals prepared at any restaurant.
(Hint: Define one unit of distance as 50 miles if that makes the problem easier.)
If you were a dictator interested in the efficient way to feed the population, how many restaurants would you build?
If the free market determines the number of restaurants, and the result is firms that make zero economic profit, how many firms will there be?
In what sense is this model one of monopolistic competition?
a.
b.
C.
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