Monopoly outcome versus competition outcome

1. SHADE THE GRAPH (using the following information):

Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power.

The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs.

Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.

Use the green point (triangle symbol) to shade the area that represents consumer surplus.

Use the purple point (diamond symbol) to shade the area that represents producer surplus.

Graph 1 (competitive market graph):

PRICE (Dollars per hot dog) 5.0 4.5 50 100 Competitive Market 150 200 250 300 350 400 450 500 QUANTITY (Hot dogs) Consumer Surplus Producer Surplus PRICE (Dollars per hot dog) 5.0 45 50 100 Monopoly 150 200 250 300 350 400 450 500 QUANTITY (Hot dogs) ep L Monopoly Outcome A Consumer Surplus Producer Surplus Deadweight Loss monopoly competitive market Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a and the quantity is lower under a w ., competitive market monopoly Given the summary table of the ctures, you can infer that, in general, the price is higher under a and the quantity is lower under a v Price Quantity Market Structure (Dollars) (Hot dogs) Competitive Monopoly