Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 19

Suppose a perfectly competitive market for hotdog stands in New York City becomes monopolistically competitive when gourmet, discount, and ethnic hot-dog retailers show up, making each cart slightly different. If hot dogs from different stands are now imperfect substitutes and there are numerous carts in the city, compare the producer and consumer surplus and total social welfare before and after the change.