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Suppose there are 1,000 hot pretzel stands operating in New York City. Each stand has the usual U-shaped average-total-cost curve. The market demand curve for pretzels slopes downward, and the market for pretzels is in long-run competitive equilibrium.
a. Draw the current equilibrium, using graphs for the entire market and for an individual pretzel stand.
b. The city decides to restrict the number of pretzel-stand licenses, reducing the number of stands to only 800. What effect will this action have on the market and on an individual stand that is still operating? Draw graphs to illustrate your answer.
c. Suppose that the city decides to charge a fee for the 800 licenses, all of which are quickly sold. How will the size of the fee affect the number of pretzels sold by an individual stand? How will it affect the price of pretzels in the city?

Sagot :

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Answer:

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Answer:

Your answer would be $2.25

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Step-by-step explanation:

Lets gather some important information from the question:

Important information:

Total cost of lemonades is $0.25 more than the cost of a pretzel

Total cost of two pretzels and a lemonade is $5.75

With the information above, we can use it to find the answer to your question.

We would represent pretzels as P and lemonades as L

P = Pretzel

L = Lemonade

We know that two lemonades is $0.25 more than pretzel.

This means that one lemonade would cost  

We would use  in our  equation.

Now, we can solve.

Once you're done solving, you should get 2.25

This means that the cost of a pretzel is $2.25.

$2.25 should be your FINAL answer.

Explanation:

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