Use the following to answer question(s): The Restaurant Model

-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.In long-run equilibrium, the economic profit earned by the typical restaurant in the community will be:
A) negative.
B) zero.
C) equal to the level shown in the exhibit.
D) There is not enough information given to answer the question.

Question

Use the following to answer question(s): The Restaurant Model
 
-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.In long-run equilibrium, the economic profit earned by the typical restaurant in the community will be:
A) negative. 
B) zero. 
C) equal to the level shown in the exhibit. 
D) There is not enough information given to answer the question.

Quizplus · Accepted Answer

In a competitive market, long-run equilibrium results in zero economic profit, or normal profit. The exhibit shows the average total cost curve intersecting with the demand curve at the profit-maximizing quantity, which would result in zero economic profit. Therefore, the answer is B.

Use the Following to Answer Question(s): the Restaurant Model