ESSAY. Write your answer in the space provided or on a separate sheet of paper.
Figure 13-990)Refer to Figure 13-9.Figure 13-9 depicts a monopolistically competitive barber shop. Use the diagram toanswer the following questions.a.Suppose the average variable cost of production is $15 when output equals 110 haircuts and $15.25 whenoutput equals 140 haircuts. If the firm wants to maximize its profit or minimize its losses, how many haircutswill it produce and what price should it charge? Explain your answer.b.Calculate the firmʹs profit or loss.c.What is likely to happen in this industry over time as it moves to its new long-run equilibrium?d.Suppose the barber shop depicted in the diagram remains in the industry. Is this barber shop likely toproduce this same quantity of haircuts as in part (a) in the long run?
Diff: 2Page Ref: 438-439/438-439Topic: Monopolistic Competition in the Long RunLearning Outcome: Micro 15: Discuss the role of differentiation in monopolistic competition in comparison to other marketconditionsAACSB: Analytic Skills31