Scenario 16-3 Peter Operates an Ice Cream Shop in the Center of Center

question 579

Multiple Choice

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.)
-Refer to Scenario 16-3. Which of the following statements best describes the long run adjustment in this market?

• A)One or more ice cream shops in Fairfield closes, increasing the demand for Peter's ice cream. Peter's profits increase and he sustains positive profits in the long run.
• B)One or more ice cream shops in Fairfield closes, increasing the demand for Peter's ice cream. Peter's profits increase until he earns zero profit.
• C)One or more new ice cream shops in Fairfield opens and competes with Peter for customers, reducing the demand for Peter's ice cream. Peter's profits decline until he incurs losses and exits the industry.
• D)One or more new ice cream shops in Fairfield opens and competes with Peter for customers, reducing the demand for Peter's ice cream. Peter's profits decline until he earns zero profit.

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Definitions:

Public Sector

The part of the economy composed of government services and enterprises, including infrastructure, education, and healthcare services.

Labor Productivity

refers to the amount of goods and services produced by one hour of labor.

Developing Nations

Countries that are in the process of industrialization and have lower levels of material well-being compared to developed economies.

Privately Controlled

refers to entities or businesses that are owned, operated, and managed by private individuals or corporations rather than by the government.