Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 13, Problem 3P
To determine
Profit, loss and market mechanism under monopolistic competition .
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Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. What is the size of this firm’s profit or loss? Will there be entry or exit? Will this restaurant’s demand curve shift left or right? 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 profit? Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. Is the deadweight loss for this firm greater than or less than $60
Suppose that an monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that
output level, ATC per meal is $10 and consumers are willing to pay $12 per meal.
What is the size of this firm's profit or loss? Profit
Will there be entry or exit? Entry
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of $ 460
Will this restaurant's demand curve shift left or right? Left
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 profit? $ 540 x
Suppose that an monopolistically competitive restaurant is currently serving 270 meals per day (the output where MR = MC). At that
output level, ATC per meal is $10 and consumers are willing to pay $13 per meal.
What is the size of this firm's profit or loss? Profit
of $
Will there be entry or exit? Entry
k
Will this restaurant's demand curve shift left or right? Left
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
$9.
ices
What is the size of the firm's profit? $
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Chapter 13 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
Ch. 13.1 - Prob. 1QQCh. 13.1 - Prob. 2QQCh. 13.1 - Prob. 3QQCh. 13.1 - Prob. 4QQCh. 13.4 - Prob. 1QQCh. 13.4 - The D2e segment of the demand curve D2eD1 graph...Ch. 13.4 - Prob. 3QQCh. 13.4 - Prob. 4QQCh. 13.A - Prob. 1ADQCh. 13.A - Prob. 2ADQ
Ch. 13.A - Prob. 3ADQCh. 13.A - Prob. 4ADQCh. 13.A - Prob. 1ARQCh. 13.A - Prob. 2ARQCh. 13.A - Prob. 3ARQCh. 13.A - Prob. 1APCh. 13.A - Prob. 2APCh. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQCh. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Prob. 13DQCh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3P
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- Suppose that a monopolistically competitive restaurant is currently serving 250 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $13 per meal. Instructions: Enter your answers as whole numbers. What is the size of this firm's profit or loss? $0 Will there be entry or exit? (Click to select) As a result, will this restaurant's demand curve shift left or right? (Click to select) Assume that the allocatively efficient output level in long-run equilibrium is 210 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 $9. What is the size of the firm's profit? $[ Suppose that the allocatively efficient output level in long-run equilibrium is 210 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 $9. Is the deadweight loss for this firm greater…arrow_forwardSuppose that a monopolistically competitive restaurant is currently serving 240 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Instructions: Enter your answers as whole numbers. What is the size of this firm's profit or loss? $0 Will there be entry or exit? Click to select) As a result, will this restaurant's demand curve shift left or right? ((Cick to select) Assume 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 profit? $[ 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…arrow_forwardencient? Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 3; 100 50 90 80 88 + 70 70 60 550 40 PRICE (Dollars per razor) 30 30 10 MC 20 20 0 10 10 ATC +. ? Mon Comp Outcome MR Demand 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Min Unit Costarrow_forward
- Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (DD) curve, marginal revenue (MRMR) curve, marginal cost (MCMC) curve, and long-run average total cost (LRATCLRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market.arrow_forward!arrow_forwardThe transition from short-run to long-run equilibrium in a monopolistically competitive industry is rather analogous to that in a perfectly competitive one.What factor(s) might drive profits to zero in a perfectly competitive firm in the long run? Would your answer to the previous question differ if we consider a monopolistically competitive firm rather than a perfectly competitive firm? Finally, why would a firm choose to operate at a loss in the short run? When would it decide to shut down production temporarily?arrow_forward
- Suppose a country's mobile phone industry is supplied by only two firms (i.e. an oligopoly). Explain how the presence of two firms affects the price elasticity of demand of each firm's output.arrow_forwardSusan owns a restaurant that sells hamburgers in a monopolistically competitive market. The graph to the right depicts the demand and marginal revenue for her hamburgers. Suppose that Susan's restaurant is maximizing profits at 35 hamburgers (per day). Assume that the monopolistically competitive industry is at a long-run equilibrium. Use the three-point curve drawing tool to add Susan's long run average cost (ATC) curve to the graph. Properly label this curve. Carefully follow the instructions above, and only draw the required objects. ul Price and cost (dollars per hamburger) 2.00- 2.25- 2.00- 1.75 1.50- 1.25 1.00- 0.75- 0.50 0.25 0 MR 10 20 30 40 50 60 70 80 Quantity of hamburgers (per day) ATC D 90 100 a Garrow_forwardAssume that in short-run equilibrium, a particular monopolistically competitive restaurant (Applebee's) charges $12 for each order of Chicken Parmesan and sells 52 orders per day. The average total cost (ATC) for those 52 orders is $10. How much revenue will the firm take in each day? $ What will be the firm's economic profit or loss on Chicken Parmesan? Next, suppose that other restaurants add/remove chicken parmesan from their menus (entry or exit occurs) and a long-run equilibrium is established. If the Applebees daily Chicken Parmesan orders remain at 52 units, what price will it be able to charge? $ What will be its economic profit or loss?arrow_forward
- Consider a monopolistically competitive market in long-run equilibrium, and a firm that is in the market. Suppose there is a shortage of a key input, so that every firm's ATC curve shifts up by a fixed amount. If the firm remains in the market in the new long-run equilibrium, what happens to the price at which it sells the good, and what quantity does it sell? Price goes down, quantity stays the same Price goes up, quantity stays the same Price goes down, quantity goes down Price goes up, quantity goes downarrow_forwardSuppose the market for cereal is monopolistically competitive and in long-run equilibrium. The demand (and marginal revenue) for a firm in this industry is illustrated in the graph to the right, along with that firm's average total cost and marginal cost of producing its brand of cereal. Compared to perfectly competitive markets in the long-run, monopolistically competitive markets, such as that for cereal, allocatively efficient because they produce excess capacity. For example, according of thousand boxes. are are not onopolistically competitive firm has excess capacity esponse using an integer.) 150 135- 120- 105- 90- 75- 60- 45- 30- 15- Price and cost (dollars per box) MC ATC MR D 10 20 30 40 50 60 70 80 90 100 Quantity of cereal (per week in 1000s) Q Qarrow_forwardNonearrow_forward
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