3. Consider one of the many bakeries that serves a local community. Each bakery produces a slightly differentiated bread, there are no barriers to entry or exit, and the bakery (firm) is in the long-run equilibrium. (a) Draw and label a graph showing the firm's demand curve, marginal revenue curve, marginal cost curve, and average total cost curve. Label the firm's profit-maximizing output Q* and its price P*. (b) Does this market produce the welfare-maximizing (efficient scale) level of output? Explain. (c) Label the welfare-maximizing (efficient scale) output (Qw) and corresponding price (Pw) on the graph drawn in part (a)?

3. Consider one of the many bakeries that serves a local community. Each bakery produces a slightly differentiated bread, there are no barriers to entry or exit, and the bakery (firm) is in the long-run equilibrium. (a) Draw and label a graph showing the firm's demand curve, marginal revenue curve, marginal cost curve, and average total cost curve. Label the firm's profit-maximizing output Q* and its price P*. (b) Does this market produce the welfare-maximizing (efficient scale) level of output? Explain. (c) Label the welfare-maximizing (efficient scale) output (Qw) and corresponding price (Pw) on the graph drawn in part (a)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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