Question

Aji Fatou has the option of leasing out this space instead of opening a restaurant. The market rent for his property is $600. Explain how you would interpret his profits under Perfect Competition and Monopoly in the restaurant business in relation to the rents she would earn from leasing out his property. In your answer, identify Aji Fatou’s explicit and implicit costs and accounting profits from the restaurant business in each market

Answer 1

Successful restaurants at any level have a number of things in common. Your food meets the diners' expectations, marketing brings in enough customers to pay the bills, and costs stay under control. Food and labor costs are the two largest expenses, and they require daily vigilance from the chef or management staff. Lease costs are typically the third-highest expense, but they're not as variable and are sometimes overlooked.

A monopoly refers to when a company and its product offerings dominate a sector or industry. Monopolies can be considered an extreme result of free-market capitalism in that absent any restriction or restraints, a single company or group becomes large enough to own all or nearly all of the market (goods, supplies, commodities, infrastructure, and assets) for a particular type of product or service. The term monopoly is often used to describe an entity that has total or near-total control of a market.As in monopoly single seller is there so the company or restaurant will be price maker that is, it could fix the price.

Perfect competition the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers.As we told in first para it must be up to expectations but in perfect market situation there are buyers and seller so it's tough job to maintain profit. In this case explict cost would be high as the implicit cost. Leasing building is easy way to earn.