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Suppose the monopolistically competitive barber shop

Question # 00554225
Subject: Economics
Due on: 06/29/2017
Posted On: 06/29/2017 06:46 AM

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This is microeconomics. Please write graphs and explanation.


Suppose the monopolistically competitive barber shop industry in a community is in long-run equilibrium, and that the typical price is $20 per haircut. Moreover, the population is rising.

  1. Illustrate the short-run effects of a change on the price and output of a typical firm in the market.
  2. Show what happens in the long run. Will the final price be higher than $20? Equal $20? Be less than $20? Assume that nothing happens to the cost of producing haircuts.
  3. Suppose that, initially, the price of a typical children’s haircut is $10. Do you think this represents price discrimination? Why or why not?

Consider the same industry as in Problem 1. Suppose the market is in long-run equilibrium and that an annual license fee is imposed on barber shops.

  1. Illustrate the short-run effects of the change on the price and output of haircuts for a typical firm in the community.
  2. Now show what happens to price and output for a typical firm in the long run.
  3. Who pays the fee in the long run? How does this compare to the conclusions of the model of perfect competition?

Tags shop barber competitive monopolistically suppose price typical output firm long happens suppose illustrate haircut shortrun change haircuts market effects longrun industry barber community equilibrium annual license problem consider discrimination represents imposed competition think conclusions model

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Suppose the monopolistically competitive barber shop

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Monopolistic_Market.docx (458.54 KB)
Preview: and xxxxxxx Consider xxx same industry xx in Problem x Suppose xxx xxxxxx is xx long-run equilibrium xxx that an xxxxxx license xxx xx imposed xx barber shops xxxxxxxxxx the short-run xxxxxxx of xxx xxxxxx on xxx price and xxxxxx of haircuts xxx a xxxxxxx xxxx in xxx community An xxxxxxxx in price xxxx reduce xxx xxxxxxx reduction xx profits caused xx the fixed.....
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