Monopolistically competitive restaurant is currently serving

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Suppose that a monopolistically competitive restaurant is currently serving 280 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal.

a. What is the size of this firm’s profit or loss?

b. Will there be entry or exit? . Will this restaurant’s demand curve shift left or right?

c. Assume that the allocatively efficient output level in long-run equilibrium is 220 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm’s profit?

Reference no: EM131246849

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