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In 2020, the town of Rollaville had a more-or-less competitive market for hot pretzel stands. Any respectable seller could set up a hot pretzel stand
In 2020, the town of Rollaville had a more-or-less competitive market for hot pretzel stands. Any respectable seller could set up a hot pretzel stand as long as certain health requirements are met. Each stand has the constant marginal cost of $4 per pretzel and can make 40 hot pretzels per day. Let the demand function for hot pretzels be given by D(p) = 600 - 40p, where demand is measured in number of hot pretzels per day, and price is measured in dollars. Assume that the industry is perfectly competitive. 1. In equilibrium, the price will be [ Select ] and there will be [ Select ] hot pretzel stands in equilibrium. 2. In 2021, the City Council of Rollaville created a hot pretzel stand licensing board and issued a license to each of the existing stands. The board stated that they would issue no more new licenses in 2021. Costs had not changed, but the demand curve for hot pretzel had become D(p) = 680 - 40p. The the new equilibrium price of a hot pretzel in 2021 is [ Select ] 3. In 2022, the demand curve for hot pretzel remains the same: D(p) = 680 - 40p. Suppose that the City Council felt that the hot pretzel price in part (2) above is too high and decided to issue enough new licenses so that the hot pretzel price is $4. This would require [ Select ] additional license(s)
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