Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 5

Draw a diagram similar to Figure 1,panel (b),but this time illustrate what happens to a typical real estate agent after a fall in home prices that causes the average commission to decrease from $6,000 to $3,000. Assume that the typical agent is initially selling 10 homes per year,and that the total number of homes sold in the market does not change. (Hint: If you do this correctly,your diagram should show each agent selling more homes than before.)Figure 1 After Commissions Rise,L ong-Run Profit Returns to Zero