Tomas is the general manager for a local automated car wash. The market he operates is perfectly competitive. Every car wash in the area is charging $7 for a car wash, which is also the marginal cost per wash. What will happen to Tomas’ profits if he changes his price to $8. Why? What about the price of $5? What is his profit-maximizing price? 2. Tomasautomated Car wash.Operates isCar washin the área 1sfor a Car Wash, Whch is alss fhe_margnalÇost Per wash. What will halpfen to Tomas;Protits it he Changes his Prige to $8. Why?What about the Bice of $5? What is his cBrotd- maxmizing Bice ?localgeneramat ket bethemanager foraPerkectly ComPett ve. EveryCharginghing Objectt supply

Answered: Tomas is the general manager for a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Tomas is the general manager for a local automated car wash. The market he operates is perfectly competitive. Every car wash in the area is charging $7 for a car wash, which is also the marginal cost per wash. What will happen to Tomas’ profits if he changes his price to $8. Why? What about the price of $5? What is his profit-maximizing price?

2. Tomas
automated Car wash.
Operates is
Car washin the área 1s
for a Car Wash, Whch is alss fhe_margnal
Çost Per wash. What will halpfen to Tomas;
Protits it he Changes his Prige to $8. Why?
What about the Bice of $5? What is his c
Brotd- maxmizing Bice ?
local
generamat ket be
the
manager for
a
Perkectly ComPett ve. Every
Charging
hing Object
t supply

Expert Solution

Introduction

Perfectly competitive market: It is a market structure where there exists a large number of buyers and a large number of sellers selling homogenous goods and services. The entry and exit in such a market structure are very easy.