New mexican restaurant, specializing in burritos

Reference no: EM13853412

Econ 355

2. Assume a new Mexican restaurant, specializing in burritos, wants to open on Green street. Assume the restaurant has some market power over the price they set, and that they face a fixed cost of setting up a restaurant.

a. Illustrate graphically how they choose how many burritos to sell, and at what price (hint: illustrate the demand curve they face). Show their profit.
b. Assume that each firm sets its price at pi = 1/(bn) + c, and have average costs of AC = Fn/Qtot + c. 'b' is 1/50, where 'c' is the marginal cost of $2 per meal and F is a fixed cost of $25,000. If market is 50,000 meals per week, how many restaurants can Green street support? What price will they charge for their meals?

c. Explain intuitively what would happen to Chipotle's elasticity of demand if the burrito place opens up next door (where Chipotle is a competing burrito place)? What does this imply about the markup (p/mc) that Chipotle can now charge?

d. Assume Green street enters into trade with downtown Champaign, where downtown Champaign produces beer and Green street produces food after trade. What happens to price of food on Green street after trade? How does your answer change if the restaurant industry is a perfectly competitive industry? Explain.

e. Using your graph in (a) illustrate how this new entry affects sales and profits at Chipotle.

Reference no: EM13853412

Questions Cloud

Create the work breakdown structure : Create the work breakdown structure (WBS) as shown in the textbook listing the tasks that will need to be completed to meet the project's objectives.

Describes the increase in the money supply : Your book describes the increase in the money supply as being analogous to giving people more money. If the output of goods and services is not growing at a similar rate, inflation will eventually occur. According to PPP Theory, what will happen to t..

Develop marketing plan for solar power products company : Develop marketing plan for solar power products company in Australia.

Prepare a job description for two new employee : Based on your answer to "who you need," you will prepare a job description for two new employee positions for your business. If you are a sole proprietor, make one for yourself and one additional position

New mexican restaurant, specializing in burritos : Assume a new Mexican restaurant, specializing in burritos, wants to open on Green street. Assume the restaurant has some market power over the price they set, and that they face a fixed cost of setting up a restaurant.a. Illustrate graphically how th..

What classification is the drug? : What classification is the drug?

How have human activities changed the landscape : How have human activities changed the landscape and how has this affected native species? Include specific examples

The final change in output for the economy : If the final change in output for the economy as a whole is $119.6 billion, unemployment is 6.2% and there had previously been an initial increase in government spending of $46 billion, what is the value of the multiplier? Round your answer to one de..

Initial post must include in text citations and a reference : The initial post must include in text citations and a reference list. Include a reflection and conclude with a question ? Write with this topic. 1} Focusing on Financial Impact & Innovation

User Account

All Pages