Question
In: Economics
Show how the profit-maximizing graph would differ for a firm if the city does away with...
Show how the profit-maximizing graph would differ for a firm if the city does away with the medallion system and allows new firms to enter the taxi business at will which leads to a large number of new entrants.
Solutions
Expert Solution
New cab drivers will enter the market only if they are
cost-efficient enough to match the existing price P, which is the
minimum of MC of all firms in a competitive market.
They take the demand curve as horizontal - supply however much they
can for price P.
They decide their quantity Qc (taking price as exogeneous) such
that [ MC(Qc) = P ]
This is shown as the point of intersection between the horizontal (competitive market's) demand curve D2 and the marginal cost curve MC.
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Rahul Sunny answered 1 year agoRelated Solutions
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How do you find the profit maximizing PRICE (not level of output) on a graph for...
How do you find the profit maximizing PRICE (not level of
output) on a graph for a monopoly with demand, marginal revenue,
marginal cost, and average total cost curves.
Find the point where MR = MC and go straight over to the price
axis.
Find the point where demand hits marginal cost and go straight
over to the price axis.
Find the point where MR = MC, go straight up until you hit the
demand curve, and then go straight...
Please draw the graphs to show different profit-maximizing scenarios that a perfectly competitive firm will be...
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support your arguments
A) The Firm is operating and earns a positive profit.
B) The Firm is operating and earns 0 profit.
C) The Firm is operating but earns negative profit.
D) The Firm is indifferent between operating and shutting
down.
E) The Firm Shuts down.
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Suppose the following graph represents a monopoly firm's
situation:
A. What would be the profit-maximizing level of output for the
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