Thank you

Problem set 2 is worth 15% of your nal grade. The total points for this problem set is 110. Points over 100 will be carried over to other problem sets. This is due at 10pm (Sydney time) Friday of Week 5 (10pm of July 2nd). 20% will be deducted from the mark of late submissions, and submissions late by more than 24 hours will not be marked. Please upload your answers to Moodle. 1. Pricing Restrictions versus Quantity Restrictions: 40 points Consider two nightclubs in Pawnee, called the Snakehole Lounge and the Bulge. They both have the same constant (private) marginal cost of production c. The market de- mand for nightlife in Pawnee is D (p) , where p is the price of entry and demand is decreasing in p. The rms engage in price competition: The demand for the Snakehole Lounge is 0 PS > PB Ds (PSIPB) = :D (vs) P5 = PB:- D (PS) ps c or PB 2 PS > C. (3 points)