Consider 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 powerThe 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 (Oole per gyro)3453.52520140.0#•4010Competitive MarketS-MC120 180 200 240 20QUANTITY (Oyres)300400+'tPC OutcomeNow 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 vendorPlace the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a iof a monopolat Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolistPRICE (0)========26MonopolyCMR4080 126 40 200 240 260 320 300 400QUANTITY (Oyros)+Monopoly OutcomeDeadweight LossConsider the welfare effects that result from the industry operating as a competitive market versus a monopolyOn 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 anybodyDeadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the efficient) competitiveoutcome.4

A competitive market produces at the intersection of market demand and market supply curve. A…

et for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyre vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as 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.