5. Monopoly outcome versus competition outcomeConsider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in thecity, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power.The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs.Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.Competitive Market5.04.5PC Outcome4.03.53.02.52.01.51.00.50PRICE (Dollars per hot dog)03060S=MC90 120 150 180 210QUANTITY (Hot dogs)D240270 300 Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. Thisfirm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that thenew monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph showsthe demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm.Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist.?Monopoly5.04.5Monopoly Outcome4.03.53.0Deadweight Loss2.52.01.51.00.5DMR0030 6090 120 150 180 210 240 270 300QUANTITY (Hot dogs)Consider the welfare effects when the industry operates under a competitive market versus a monopoly.On 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 anybody.Deadweight loss occurs when a monopoly controls a market because the resulting equilibrium is different from the competitive outcome, which isefficient.In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity thatwould be chosen if a monopolist controlled this market.PriceQuantity(Hot dogs)Market Structure (Dollars)CompetitiveMonopolyGiven the summary table of the two different market structures, you can infer that, in general, the price is higher under aand the quantity is lower under aPRICE (Dollars per hot dog)MC

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In a competitive market, profit is maximised at a point where price is equal to marginal cost. In a…