The above figure represents a restaurant operating in monopolistic competition
a. What is the profit-maximizing level of output?
b. What price will the firm charge?
c. What is the firm's profit (or loss)?
d. Is this a long-run equilibrium? Why or why not?
e. Is this firm producing its efficient scale of output?
a. The quantity is 20 meals a day.
b. The price is $12 per meal.
c. The firm is making zero economic profit, that is, the firm is earning a normal profit.
d. This is a long-run equilibrium because the firm is making zero economic profits so there is no incentive for either entry or exit.
e. No, the firm is not producing its efficient scale of output. It is producing less than the efficient scale. The efficient scale, where the average total cost is at is minimum, is 50 meals a day. Hence the firm has excess capacity.
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Many central banks around the world target an inflation rate of about ________, because of upward bias in measured inflation and to reduce the risk of deflation
A) -2%. B) 0%. C) 2%. D) 5%.
The aggregate supply curve is vertical at the level of real GDP that corresponds to the natural rate of unemployment
a. True b. False Indicate whether the statement is true or false
Labor-saving technological advances decrease the marginal productivity of labor
a. True b. False Indicate whether the statement is true or false
Which of the following policies would a Keynesian expect to produce the largest decrease in income?
A. A reduction in government spending of $100 billion B. A decrease in transfer payments of $100 billion C. An increase in government spending of $100 billion D. A tax increase of $100 billion