In Alabama, those who hunt and kill alligators for commercial purposes (that is, to sell them) must have a license.The state government places a limit on the number of commercial licenses it issues. For purposes of this question, assume that the number of wild alligators roaming around Alabama is unlimited.

Suppose that the demand for Alabama alligator sausage increases.

a. In the short run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Explain your answers.

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b. In the long run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers?

Compare the long-run equilibrium to the equilibrium that existed before the increase in demand. Explain answers to part A and B.

Now suppose that the state of Alabama eliminates its system of licensing Alabama alligator sausage producers. That is, suppose that it is no longer necessary to obtain a license from the state in order to produce Alabama alligator sausage.

Suppose that the demand for Alabama alligator sausage increases.

c. In the short run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Explain answer.

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d. In the long run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Compare the long-run equilibrium to the equilibrium that existed before the increase in demand. Explain answer.

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e. Which is better - having the licensing requirements or not having them? Justify your answer, being sure to explain what you mean by "better."

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