A small city has a number of hot dog stands operating throughout the CBD area. Suppose that each vendor has a marginal cost of R1,50 per hot dog sold and no fixed cost. Suppose the maximum number of hot dogs that any one vendor can sell is 100 per day.

Suppose the city decides to regulate the market by issuing permits and the demand curve

in Question 12 is given. Suppose the city issues only 20 permits and each vendor sells

100 hot dogs per day, what will be the price of a hot dog?

[1] P = R 1,50

[2] P = R 2,00

[3] P = R 2,50

[4] P = R 3,00