The above figure represents a restaurant operating in ...

[Alygatorr01285]

The above figure represents a restaurant operating in monopolistic competition.
 
  a. What is the profit-maximizing level of output?
  b. What price will the firm charge?
  c. What is the firm's profit (or loss)?
  d. Is this a long-run equilibrium? Why or why not?
  e. Is this firm producing its efficient scale of output?

Question 2

In a regressive tax system, ________.
 
  A) low income households pay a higher percentage of their income as taxes
  B) high income households pay a higher percentage of their income as taxes
  C) all households pay the same amount of taxes irrespective of their income
  D) all households pay the same percentage of their income as taxes

[katara]

Answer to Question 1

a. The quantity is 20 meals a day.
b. The price is 12 per meal.
c. The firm is making zero economic profit, that is, the firm is earning a normal profit.
d. This is a long-run equilibrium because the firm is making zero economic profits so there is no incentive for either entry or exit.
e. No, the firm is not producing its efficient scale of output. It is producing less than the efficient scale. The efficient scale, where the average total cost is at is minimum, is 50 meals a day. Hence the firm has excess capacity.

Answer to Question 2

A

[Alygatorr01285]

Thanks for the timely response, appreciate it

[Dominic]

Gracias!