PRICE (Dollars per gyro)5.04.54.0403.53.02.52.01.51.00.50050 100MonopolyMRMCD150 200 250 300 350 400 450QUANTITY (Gyros)500Consider the welfare effects that result from the industry operating as a competitive market versus a monopoly.Monopoly OutcomeDeadweight LossOn the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by amonopoly. 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) competitiveoutcome.In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity thatwould be chosen if a monopolist controlled this market.PriceMarket Structure (Dollars)Quantity(Gyros)CompetitiveMonopolyGiven the summary table of the two different market structures, you can infer that, in general, the price is lower under aand the quantity is lower under a 5. Monopoly outcome versus competition outcomeConsider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitiveequilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors actas price takers and each individual vendor has no market power.The following graph displays the supply (SMC) 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.PRICE (Dollars per gyro)5.04.54.03.53.02.5Competitive Market2.0S=MC1.51.00.5D00 50100150 200 250 300 350 400450500QUANTITY (Gyros)PC Outcome?Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in theneighborhood. 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 doesnot affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. Thefollowing graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for themonopoly vendor.

A monopoly is a market structure when there is only one seller present. Due to the lack of a close…

PRICE (Dollars per gyro) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 ° 0 50 Monopoly MC D MR 100 150 200 250 300 350 400 450 500 QUANTITY (Gyros) Consider the welfare effects that result from the industry operating as a competitive market versus a monopoly. Monopoly Outcome Deadweight Loss 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 Market Structure (Dollars) Quantity (Gyros) Competitive Monopoly Given the summary table of the two different market structures, you can infer that, in general, the price is lower under a and the quantity is lower under a