versus competition outcome ider the daily market for hot dogs in a small city. S
ID: 1158538 • Letter: V
Question
versus competition outcome ider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibriu hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power s in a small city. Suppose that this market is in long-run competitive equilibrium, with The following graph shows the demand (D) and supply curves (s - MC) in the market for hot dogs Place the black point (plus symbol) on the graph to indicate the market price and quantity that willresult from competition. Use the green point (triangle symbol) to shade the area that represents consumer surplus, and use the purple point (diamond symbol) to shade the area that represents producer surplus. Competitive Market 5.0 T 4.5 PC Outcome 4.0 3.5 E 3.0 Consumer Surplus 25 e 20 Producer Surplus 0.5 50 100 10 200 20300 350400 450 800 QUANTITY (Hot dogs)Explanation / Answer
According to the graph of competitive, we can find the price and quantity that would arise in a competitive market.
The price and quantity that would arise in a competitive market is where the S = Mc curve intersect the Demand curve.
It is the point where Price is $1.5 and the quantity (hot dog) is 250.
- Profit maximizing price and quantity that would be chosen if a monopoly controlled this market is where MR = MC in the monopoly graph.
According to the graph of monopoly the Quantity where the MR =MC is 150. And to find the price we have to extend the vertical line from this point where MR = MC and stop it where it touched the demand curve because putting this quantity of hotdogs (i.e., 150) in the demand curve we get the price charged by the monopoly.
so it touches at price $2.5
the pofit maximizing price is $2.5 and quantity is 150 that would be chosen if the monopoly controlled in the market.
Given the summary table of the two different market structures, you can infer that, in general, the price is lower under a Competitive market as (1.5 < 2.5) and the quantity is lower under a Monopoly as (150 < 250) .
Market structure Price ($) Quantity(hot dogs) Competitive 1,5 250 Monopoly 2.5 150Related Questions
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