Figure below shows a monopolistically competitive restaurant in the short run. U

Question

Figure below shows a monopolistically competitive restaurant in the short run. Use it for the next four questions. How many dinners docs the firm produce? 200 400 600 None of the above What price docs the firm charge per meal? $5 $15 $20 $25 The firm in the figure is making an economic profit. breaking even (making zero economic profit). incurring an economic loss. incurring an accounting loss. In the long run, new restaurants will enter and each existing restaurant's demand decreases. new restaurants will enter and each existing restaurant's demand increases. existing restaurants will leave and each remaining restaurant's demand decreases. existing restaurants will leave and each remaining restaurant's demand increases.

Explanation / Answer

(a) At MR=MC, Q=400 units

(b)At Q=400,price from demand curve is 25

(c) Since price>ATC at Q=400,so firm is economic making profit.

(d)In long run,new firms will enter because of profits and each existing firms's demand decreases because of rise in number of firms.

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