Suppose that the restaurant industry in Honolulu is monopolistically competitive and is currently in Stage 2 equilibrium (firms currently make zero profit). The graph below shows the cost curves for a typical restaurant in this industry. (a) Draw a demand curve and an MR that is consistent with this market being in Stage 2 equilibrium. (b) Show the equilibrium price Now suppose an highly-infectious new virus comes to the island, causing demand for restanrant meals to shift in. (c) What would you expect this change in restaurant demand when the number of firms is fixed? Explain. (d) What would you expect the change in demand to do to the number of meals sold, prices and profits of firms in the long run if firms can enter and exit? What happens to the mumber of restaurants?
Suppose that the restaurant industry in Honolulu is monopolistically competitive and is currently in Stage 2 equilibrium (firms currently make zero profit). The graph below shows the cost curves for a typical restaurant in this industry. (a) Draw a demand curve and an MR that is consistent with this market being in Stage 2 equilibrium. (b) Show the equilibrium price Now suppose an highly-infectious new virus comes to the island, causing demand for restanrant meals to shift in. (c) What would you expect this change in restaurant demand when the number of firms is fixed? Explain. (d) What would you expect the change in demand to do to the number of meals sold, prices and profits of firms in the long run if firms can enter and exit? What happens to the mumber of restaurants?
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter6: Saving And Investing
Section: Chapter Questions
Problem 25AA
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Question
Suppose that the restaurant industry in Honolulu is monopolistically competitive
and is currently in Stage 2 equilibrium (firms
currently make zero profit). The graph below shows the cost curves for a
typical restaurant in this industry.
(a) Draw a demand curve and an MR that is
consistent with this market being in
Stage 2 equilibrium.
(b) Show the equilibrium price
Now suppose an highly-infectious new virus
comes to the island, causing demand for restanrant meals to shift in.
(c) What would you expect this change in
restaurant demand when the number of firms is fixed? Explain.
(d) What would you expect the change in demand to do to the number of meals sold, prices and profits of firms in the long
run if firms can enter and exit? What happens to the mumber of restaurants?
Transcribed Image Text:30, Sec. 4-9
22
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h the web
Homework 10
DAV
Michael J. Robert
University of Hawaii at Mana
Cost curves for typical restaurant in Honolulu
MC
AC
(a) Describe Sue's savings profile and compare it to Joe's. Why does Sue end up
with a substantially larger retirement nest egg than does Joe, even though she
O
hulu
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