Questions: 1A) If MU Café, which is a monopolistically competitive firm, is making a positive profit in the short run, why might this profit become zero in the long run? 1B) If MU Café wants to keep the profit positive in the long run, what can it do? Provide ONE suggestion and briefly explain. 1C) What externality problem do you expect in the market for plastic bags? How does the government correct the inefficiency of the market? Explain in detail and diagram.
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Questions:
1A) If MU Café, which is a
1B) If MU Café wants to keep the profit positive in the long run, what can it do? Provide ONE suggestion and briefly explain.
1C) What externality problem do you expect in the market for plastic bags? How does the government correct the inefficiency of the market? Explain in detail and diagram.
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- The graph to the right depicts the demand for caffe lattes at a local coffeehouse along with the average total cost and marginal cost of producing lattes. Suppose the coffeehouse is in a monopolistically competitive market in the short run. How many caffe lattes should this coffeehouse produce to maximize profits? units. (Enter a numeric response using an integer.) MC What is the corresponding profit-maximizing price? $ per latte. (Enter a numeric response using a real number rounded to two decimal places.) g 3.2아 을 2.901 АТС Calculate the coffeehouse's profits on caffe lattes. $. (Enter a numeric response using a real number rounded to two decimal places.) 응 2.42 … . 2.00 MR D 38 95 Quantity of caffe lattes (per day) Price and cost (dollars per cup)In which type of market, monopolistic or competitive market, is the equilibrium market price lower? Why?Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to clean the eyepiece. Jimmy believes he has the following demand for his service: Price of a Peep $1.20 Quantity of peeps demanded 1.00 90 100 150 200 250 300 70 60 50 350 40 30 400 450 20 10 500 550 a) For each price, calculate the total revenue from selling peeps and themarginal revenue per peep. Price Quantity TR MR $1.20 100 90 100 150 200 70 250 60 300 350 50 40 30 400 450 20 500 10 550 b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be? c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, though, if he…
- Monopolistic competition creates inefficiency because of the Price markups and excess capacity. The graph depicts the situation $100 for a hypothetical monopolistically competitive firm. The 90 curves included in the graph are demand (D), marginal 80 revenue (MR), average total cost (ATC), and marginal cost ATC (MC). Use the graph to find the requested values. 70 60 What is the size of the markup on the price? 50 40 markup: $ 30 What is the size of the excess capacity? 20 MC MR 10 units excess capacity: 20 30 40 50 60 70 80 90 10 100 QuantityMonopolistically competitive firms can earn above-normal economic profits in the short run. (a) In a few sentences, explain what will happen in the long run that will prevent monopolistically competitive firms from continuing to earn above-normal economic profits. (b) What is different about monopolists and oligopolists that allows these firms to earn above-normal economic profits in the long run, when perfectly competitive and monopolistically competitive firms cannot? Explain your answer in a few sentences.(c) Finally, let's assume you've been given the following information about maximum willingness to pay for a computer and a monitor: WTP Monitors WTP Computer $1,100 Chloe $500 Evan $600 $700 MC $400 $200 (1) What is the highest profit you can make with no bundling? Who buys what? (2) What is the highest profit you can make with pure bundling? Who buys what?
- (a) Explain why a monopolistically competitive firm’s profit maximization occurs at the output level when marginal revenue for the firm is equal to its marginal cost. Use a graph to prove your point for a monopolistically competitive firm. (b) What can a monopolistically competitive firm do to try to maintain economic profits?what market inefficiencies derive from monopolies and monopolistic competition?From the following graph, show the equilibriums under each scenario. Market is in equilibrium at A under competitive market. (a) Show the equilibrium under monopoly. Call this point B (b) When the demand increased in the area due to immigration, show the new competitive equilibrium, call this point C. (c) Show the new monopolistic equilibrium with increased demand and call this point D.
- ASAP1. In social welfare economics, what is the definition of social efficiency? 2. Image (A) below depicts social welfare in a market with a monopolistic seller. Is this market socially efficient? Why or why not? 3. Image (B) below depicts social welfare in a market with a monopolistic seller who is allowed to price discriminate (i.e. charge different prices to different consumers for the exact same good). Is this market socially efficient? Why or why not? Is it equitable? Why or why not? 4. What is meant by the equity-efficiency tradeoff in social welfare economics? Price P₁ P₁ Consumer Surplus Transfer Producer Surplus Deadweight B Loss A Qu A C с MC Demand Quantity Price PE Producer Surplus E B Q₁ MC Demand QuantityIn an economy with two Individuals ( A and B) discuss the results in exchange in the following situations 1. Perfect competition in which A and B accept prices as given by the market 2.A is a monopolistic and can set any price B chooses 3 A is a perfect price discriminator and can charge a different price for each unit tranded. 4 does each of these lead to a pareto efficient Solution ? It would be useful to work with an Edgeworth Box Diagram to present your solution