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(Solved): Suppose a vendor sells miniature Eiffel Towers to tourists for $9 each and the marginal cost of prod ...



Suppose a vendor sells miniature Eiffel Towers to tourists for $9 each and the marginal cost of producing the trinkets is MC = 2q + 3. a) How many miniature Eiffel Towers will the vendor produce? b) What is the vendor’s producer surplus at this output level? c) As you sip your chocolat chaud at a nearby café, you wonder about this vendor’s profitability. In accented but very good French you ask about the costs. The vendor tells you that fixed cost = $3.00 and average variable costs are, 3 + q. Is this vendor earning negative, zero, or positive economic profit in the short run? d) The vendor now recognizes that you are knowledge about economics. As the vendor wraps your miniature Eiffel Tower he/she/they asks you for advice about the long run profit outlook in the competitive miniature Eiffel Tower market. How do you respond?



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a) Vendor equates: MC = P P = $9 and MC = 2q+3 2q+3 = 9 2q
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