1. cafeteria in University is virtually a monopoly, and we will assume it is the only place one can get three meals in a day for the purpose of this question. Colonel Amer Khan boasts that as the number of students in university has risen, average costs of a plate of food have fallen.

1. What kind of service provider does cafeteria appear to be? [2 marks]
2. If University forced the cafeteria to price at marginal cost, it would have to the cafeteria. Instead, they will apply average cost pricing. Show by how much the consumer surplus would change if the cafeteria was regulated. Label the old and new prices & quantities as Pm, Qm and Pa, Qa respectively. Label the CS as D. [8]
3. The cafeteria goes on strike to put pressure on the university against this regulation. How would you convince the Management Committee of the university that cafeteria should actually be regulated, keeping in mind student welfare? [4]
4. An Econ student makes a bombshell discovery. the cafeteria is giving its staff higher than market wages and is also making no effort to control its costs. You now have proof to show the Management Committee that there is a loss to students even when the cafeteria is being regulated. Show the loss in consumer surplus with this new information versus the old CS you showed in part c. [6]
5. Amid these regulations and allegations, students start noticing that they are spending even longer times waiting in line to be served and pay for their food. Think of two economic reasons why the cafeteria may deliberately be doing this. [5]
6. Think of one way how university can address these two concerns, i.e., lower costs and reduce wait times faced by students. [5]