question archive Suppose that a monopolistically competitive restaurant is currently serving 260 meals per day (the output where MR = MC)
Suppose that a monopolistically competitive restaurant is currently serving 260 meals per day (the output where MR = MC)
Subject:MarketingPrice:2.88 Bought3
Suppose that a monopolistically competitive restaurant is currently serving 260 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.
a) What is the size of this firm's profit or loss?
b) Will there be entry or exit? Will this restaurant's demand curve shift left or right?
c) 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 $8. What is the size of the firm's profit?
