Consider the market for hot dogs in a small city. Suppose that this market is in
ID: 2494470 • Letter: C
Question
Consider the 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 dog. 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 Determine the size of consumer surplus (CS) and producer surplus (PS) in this perfectly competitive market. Place the red point (cross symbol) on the graph to indicate the market price and quantity that will result from perfect competition (PC). Dashed drop lines will automatically extend to both axes. Use the green triangle (triangle symbols) to shade the area that represents consumer surplus, and use the purple triangle (diamond symbols) to shade the area that represents producer surplus. Note: Throughout this problem, if you decide that consumer surplus or producer surplus equals zero, you should not place the shape corresponding to that area on the graph.Explanation / Answer
Market structure P($) Q($) Perfect Competition 3 80 Monopoly 3 40