1. The AIA Car Wash is a representative firm in a purely/perfectly competitive, constant-cost market. The market is currently in a long-run equilibrium. a. Use the blank axes below to draw completely and thoroughly labeled side-by-side graphs for the car wash market and for AIA Car Wash. Make sure that you clearly indicate the price and quantity of car washes in the market and price and quantity for AIA Car Wash. b. Car washes are a normal good. As the result of a remarkably healthy economy, a large number of consumers get raises (larger paychecks). Use the graphs you drew above to show how the increase in consumer income impacts the following items in the short run: i. Market price and quantity ii. AIA's price and quantity iii. Shade the rectangle representing AIA's profit or loss c. Imagine that a large number of new car washes start to open, competing with AIA. These new car washes will drive down the price of a car wash. How low can the price of a car wash drop before AIA Car Wash decides to stop providing their product?

1. The AIA Car Wash is a representative firm in a purely/perfectly competitive, constant-cost market. The market is currently in a long-run equilibrium. a. Use the blank axes below to draw completely and thoroughly labeled side-by-side graphs for the car wash market and for AIA Car Wash. Make sure that you clearly indicate the price and quantity of car washes in the market and price and quantity for AIA Car Wash. b. Car washes are a normal good. As the result of a remarkably healthy economy, a large number of consumers get raises (larger paychecks). Use the graphs you drew above to show how the increase in consumer income impacts the following items in the short run: i. Market price and quantity ii. AIA's price and quantity iii. Shade the rectangle representing AIA's profit or loss c. Imagine that a large number of new car washes start to open, competing with AIA. These new car washes will drive down the price of a car wash. How low can the price of a car wash drop before AIA Car Wash decides to stop providing their product?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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