Q CENGAGE | MINDTAP Homework(Ch 15) 5. Monopoly outcome versus competition outcome Consider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 5.0 + 4.5 Par Outcome 4.0 3.5 PRICE (Dollars per gyro) 2.0 S=MC 1.0 0.5 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Gyros) search 54OF Sunny ODEC LIT DII X PrtScn Home End PgUp F2 F3 F4 F5 F6 F7 F8 F9 F10 F11 % A & 5 7 8 9 O E R T Y U O P D F G H L Kom/staticb/ui/evo/index.html?deploymentld=59814128931844148 CENGAGE | MINDTAP Homework(Ch 15) 0.5 MR 30 60 90 120 150 180 210 240 270 300 QUANTITY (Gyros) Consider the welfare effects that result from the industry operating as a competitive market versus a monopoly. On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive outcome. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Price Quantity Market Structure (Dollars) Gyros) Competitive competitive market Monopoly monopoly 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 higher under a Grade It Now Save & Continue Continue without saving search Watchlist Ideas DII PrtSon Home End PgUp F2 F4 ES F6 F7 F8 F9 F10 A A & 5 7 8 9 O E R T Y U O P D F G H KCENGAGE | MINDTAP Homework(Ch 15) Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in the neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change does not affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. The following graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly vendor. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. Monopoly 5.0 -+ 4.5 Monopoly Outcome 4.0 + 3.5 3.0 Deadweight Loss PRICE (Dollars per gyro) 2.5 2.0 MC 05 MR O 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Gyros) 54OF Sunny arch DII PrtSon Home End PgUp F1 F2 F3 F4 ES F6 F7 F8 F9 F10 # % A & w 4 5 7 8 9 O E R T Y U O P D n G H L K