Types of markets, profit-maximizing choices, output, price, Consumer surplus and produce surplus.I need help on how to calculate the problem on the subject that i have mentioned. I having trouble understanding them.
1. In what type of market is each of the following goods and services sold? Explain your answers. Wheat, Jeans, Printer cartridges, Toothpaste, Taxi rides in a town with one taxi company.
Wheat: Perfectly Competitive, since there are too many farmers who produce wheat, the entry and exit costs are low, and products are identical.
Jeans: Monopolistic Competition, since there are many producers, entry and exit costs are low, but the products are differentiated and some makers charge a premium for their products.
Toothpaste: Monopolistic Competition, again many producers, low entry and exit costs, but differentiated products.
Taxi Rides with Single Company: Monopoly, since it is a unique service provided by just one company.
2. Suppose that the restaurant industry is perfectly competitive. Angela's Diner is always packed in the evening but rarely has a customer at lunchtime. Why doesn't Angela's Diner close-temporary shut down-at lunchtime?
The easiest way to see this is to recognize that for a perfectly competitive firm the demand curve is a horizontal line at the market price. If the firm decides to shut down during the day the firm will still have to pay all the fixed costs. In such a case it is advisable to stay open and hope that some customer shows up and provides some part of the fixed cost. Last Thanksgiving I read an article that quoted a sales manager of a big retail company saying ...
The types of markets, profit-maximizing choices, output, price, consumer surplus and produce surplus is examined.