Pat's Hair Designs is part of a monopolistically competitive haircut market in Berkeley. (a) At present, Pat is earning positive profits by running the haircut business. Draw a diagram illustrating Pat's profit-maximizing price and quantity of haircuts. Explain what your diagram shows, including a descritpion of what each line in your diagram represents. (b) Is the haircut market in Berkeley in long-run equilibrium? If it is, explain why. If it is not, draw a diagram illustrating Pat's profit-maximizing price and quantity of haircut in the long-run equilibrium (Assume Pat's remains in the market). Explain how the market moves from the equilibrium you drew in (a) to the one here. (In other words, explain which curves move and why.)

Pat's Hair Designs is part of a monopolistically competitive haircut market in Berkeley. (a) At present, Pat is earning positive profits by running the haircut business. Draw a diagram illustrating Pat's profit-maximizing price and quantity of haircuts. Explain what your diagram shows, including a descritpion of what each line in your diagram represents. (b) Is the haircut market in Berkeley in long-run equilibrium? If it is, explain why. If it is not, draw a diagram illustrating Pat's profit-maximizing price and quantity of haircut in the long-run equilibrium (Assume Pat's remains in the market). Explain how the market moves from the equilibrium you drew in (a) to the one here. (In other words, explain which curves move and why.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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