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.

1. What is this firm's profit or loss?

   $ ??

2. Will there be entry or exit?

   
   

   a. Will this restaurant's demand curve shift left or right?

   b. What is the firm's profit?
   $??
   
   

   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. Suppose that the allocatively efficient output level in long-run equilibrium is 220 meals.

3. Is this firm's deadweight loss greater than or less than $120?
   Greater or Less than? 

   
   

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