Question: 3. Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC

3. Suppose that a monopolistically competitive restaurant is currently serving 230 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. What is the size of this firm’s profit or loss? Will there be entry or exit? Will this restaurant’s demand curve shift left or right? 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? Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. Is the deadweight loss for this firm greater than or less than $60? LO13.1

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