a) Draw a correctly labeled graph for Raphael and include the curves that are necessary to identify the following. 1) The profit-maximizing price and quantity of haircuts, labeled Pm and Qm 2) The area representing economic profits, shaded completely
Raphael's hair salon is a
a) Draw a correctly labeled graph for Raphael and include the curves that are necessary to identify the following.
1) The profit-maximizing
2) The area representing economic profits, shaded completely
b) Does Raphael's hair salon produce the
c) Assume that Raphael signs a new lease with an increase in rent, a fixed cost. Will the price of haircuts provided by Raphael increase, decrease, or stay the same in the short run? Explain.
d) Assume that new hair salons enter the market and that the market becomes
1) The entry of new hair salons creates close substitutes for each individual salon's services. As a result, will the
2) Will the entry cause the demand curve for Raphael’s haircuts to shift to the left, shift to the right, or stay the same?
3) In long-run equilibrium, will Raphael’s hair salon produce the productively efficient quantity? Explain.
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