=+15.3 Business and Policy Application: License Fees and Surplus without Income Effects: In previous chapters, we explored the impact of recurring license fees on an industry’s output and price. We now consider their impact on consumer and producer surplus.

A. Suppose that all firms in the fast food restaurant business face U-shaped average cost curves prior to the introduction of a recurring license fee. The only output they produce is hamburgers. Suppose throughout that hamburgers are a quasilinear good for all consumers.