Suppose that a monopolistically competitive restaurant is cu…
Suppose that a monopolistically competitive restaurant is currently selling 250 meals per day (the output where MR=MC). At that output level, ATC per meal is $5 and consumers are willing to pay $8 per meal. a) What is this firm’s profit or loss? b) Will there be entry or exit into or out of the industry? How do you know? c) What will happen to the restaurant market in the long run? Hint: you should be able to explain whether demand or supply shifts as a result.