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Seraph asked in Social ScienceEconomics · 8 years ago

Help with this Economics question?

Consider a city that has a number of fast food stands operating throughout the main market area. Suppose that each vendor has a marginal cost of Rs. 15 per snack sold and no fixed cost. Suppose the maximum number of snacks that any one vendor can sell is 100 per day.

a. If the price of a snack is Rs. 20, how many snacks does each vendor want to sell?

b. If the industry is perfectly competitive, will the price remain at Rs. 20 for a snack? If not, what will the price be?

c. If each vendor sells exactly 100 snacks a day and the demand for snacks from vendors in the city is Q = 4400 – 120P, how many vendors are there?

d. Suppose the city decides to regulate each snack vendor by issuing permits. If the city issues only 20 permits and if each vendor continues to sell 100 snacks a day, what price will a snack sell for?

e. Suppose the city decides to sell the permits. What is the highest price that a vendor would pay for a permit?

1 Answer

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  • 8 years ago
    Favorite Answer

    a.100

    b. Rs.15

    c. 4400-1800 /100 =26.

    d. P = 2400/120 = 20 Rs.

    e. If city issues one permit a day, first will be sold at 4300/120 -15 = 22.8 Rs.

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