Suppose that a monopolistically competitive restaurant is currently serving 250

Question

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 $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? Instructions: Enter a numeric value for your answer. Suppose that the allocatively efficient output level in long-run equilibrium is 210 meals. Is the deadweight loss for this firm greater than or less than $90?T than $90.

Explanation / Answer

Profit = (12-10)*250 = $ 500

entry

left

in long run

Profit = 180(11-8) = $540

dead weight profit = 210(11-8)-540 = 630 - 540 = $90

so, exactly $90

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