Effects of change on price-output of typical firm in market

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Suppose the monopolistically competitive barber shop industry in a community is in long-run equilibrium, and that the typical price is $20 per haircut. Moreover, the population is rising.

a. Illustrate the short-run effects of a change on the price and output of a typical firm in the market.

b. Show what happens in the long run. Will the final price be higher than $20? Equal $20? Be less than $20? Assume that nothing happens to the cost of producing haircuts.

c. Suppose that, initially, the price of a typical children’s haircut is $10. Do you think this represents price discrimination? Why or why not?

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Reference no: EM131093070

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