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?
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.
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Which of the following is a FALSE statement concerning purchasing power parity?
A) Purchasing power parity states that dollars will tend to exchange for pounds at a rate that maintains a constant purchasing power of a given quantity of a currency. B) Over the long term, a Big Mac in New York will tend to cost the same as a Big Mac in London. C) There should not be significant deviations in the long-run value of purchasing power parity. D) Over the long run, purchasing power parity exerts influence over exchange rates. E) An overvalued dollar buys more in Britain than it does in the United States.
Social Security is an example of a(n)
a. annuity b. public payment c. exclusive payment d. merit payment e. transfer payment