5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 5.0 4.5 PC Outcome 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 PRICE (Dollars per hot dog) 0 30 60 90 120 150 180 S=MC 210 D 240 270 300
5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 5.0 4.5 PC Outcome 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 PRICE (Dollars per hot dog) 0 30 60 90 120 150 180 S=MC 210 D 240 270 300
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.4P: Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium...
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