Pat's Hair Designs is part of a monopolistically competitive haircut market in Berkeley. (a) At present, Pat is earning positive profits by running the haircut business. Draw a diagram illustrating Pat's profit-maximizing price and quantity of haircuts. Explain what your diagram shows, including a descritpion of what each line in your diagram represents. (b) Is the haircut market in Berkeley in long-run equilibrium? If it is, explain why. If it is not, draw a diagram illustrating Pat's profit-maximizing price and quantity of haircut in the long-run equilibrium (Assume Pat's remains in the market). Explain how the market moves from the equilibrium you drew in (a) to the one here. (In other words, explain which curves move and why.)
Pat's Hair Designs is part of a monopolistically competitive haircut market in Berkeley. (a) At present, Pat is earning positive profits by running the haircut business. Draw a diagram illustrating Pat's profit-maximizing price and quantity of haircuts. Explain what your diagram shows, including a descritpion of what each line in your diagram represents. (b) Is the haircut market in Berkeley in long-run equilibrium? If it is, explain why. If it is not, draw a diagram illustrating Pat's profit-maximizing price and quantity of haircut in the long-run equilibrium (Assume Pat's remains in the market). Explain how the market moves from the equilibrium you drew in (a) to the one here. (In other words, explain which curves move and why.)
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: Monopolistic Competition
Section: Chapter Questions
Problem 8PA
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