Question

CENGAGE | MINDTAP Aplia Homework: Monopoly 5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S - MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Use the green point (triangle symbol) to shade the area that represents consumer surplus, and use the purple point (diamond symbol) to shade the area that represents producer surplus. Competitive Market 5.0 + S=MC PC Outcome 3.5 A per hot dog) 3.0 Consumer Surplus

Answer 1

Competitine Market 3.5 Price 120 Quantity Surplus Чо Consumer Deadweight loss Monopol Pryca D Producer Surplus MR 80 Cuantity Page No

As per Rule Profit Maximizing Output for Competitive firm is at level where P = MR = MC. Here it is at 120 . In case if Monopoly Profit Maximizing Output is at level where MR = MC. Here it is at 80.

Market Structure	Price in $	Quantity
Competitive	3.5	120
Monopoly	4	80

Price is higher under Monopoly and Quantity is lower under Monopoly.

A monopoly selects a higher price and lesser quantity of output than a price-taking Competitive company. A monopoly, unlike a perfectly competitive firm, has the market all to itself and faces the downward-sloping market demand curve.