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(NOT FOR SALE . DO NOT COPY) Consider a mid-sized town located 50 miles outside of a major city. Many residents of this town use
(NOT FOR SALE . DO NOT COPY) Consider a mid-sized town located 50 miles outside of a major city. Many residents of this town use the local train and commute to work and/or school in the major city. Esther Parker owns and operates the only cafe in this mid-sized town, and this profit maximizing firm is conveniently located near the train station. While she sells a variety of drink, sandwich, and pastry combinations, the most popular is the EPM (energy packed meal). Consider that the demand for a EPM is described by the equation: P = 12 - 0.025Q, where Q is the number of EPMs per week, and P is the price per EPM. The marginal revenue is described by the equation: MR = 12 - 0.050, and with monthly loan and lease payments, Esther's cafe faces a weekly fixed cost of $100. Additional costs are mainly operational, and these include its labor costs and ingredients. These additional costs can be described by the equations: AVC = 3 + 0.025Q and MC = 3 + 0.050, where Q is the number of EPMs per week. (NOT FOR SALE . Do NOT COPY) (Question 5 of 9) Currently, the price for an EPM at Esther's cafe is $10.75 (NOT FOR SALE . DO NOT COPY) Now consider that with new grants offered (through the government's infrastructure bill) to small businesses, new firms enter the market, and the market adjusts. (NOT FOR SALE . Do NOT COPY) Esther's cafe remains dominant in the market, while the firms are highly competitive and provide the same EPMs per week. The typical new cafe has a smaller facility and provides 10 EPMs per week. The residual demand is P = 9- 0.0125Q. The residual marginal revenue is MR = 9 - 0.025Q and the competitive supply is MC = 6 + 0.025Q (NOT FOR SALE . DO NOT COPY) (NOT FOR SALE . DO NOT COPY) Given the change in the market environment, what is the current quantity traded at Esther's cafe? (report your numerical answer at 4 decimal places) 8
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