Calculate long run equilibrium

Reference no: EM1369821

Consider a small city dry-cleaning market, which is monopolistically competitive. Currently, the typical dry-cleaner is charging $5 an item. The average cost of dry-cleaning is $2. The typical dry-cleaners clean 1,000 items per week. (Each customer drops off approximately 4 items).

Suppose, a new dry-cleaner was to enter the market, and explain what would happen to the price, average cost, output, and profit of a typical dry-cleaner.

Eventually, what is the long run equilibrium?

Reference no: EM1369821

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