You love soft-serve ice cream. In the afternoons during the week at your high-paying

job in mid-town Manhattan, you frequently find yourself in line for Mr. Softee (see picture)

paying $4 for a vanilla cone with rainbow sprinkles. In order to save some money on rent and

other living expenses, you decide to move from mid-town out to Park Slope, Brooklyn, and are

surprised to find that Mr. Softee trucks sell the same vanilla cone with rainbow sprinkles for only

$2.5 in your new neighborhood. When you mention this to a friend, they tell you that ice cream

costs more in mid-town because the vending license to operate in Manhattan is significantly

more expensive.

Assume your friend is right about the cost of vending licenses in different parts of New York.

Imagine you are an owner/operator of a Mr. Softee truck in mid-town and are making decisions

about how much to charge for ice cream. (Mr. Softee is a franchise - operators pay fees to Mr.

Softee and run their businesses independently.) How should you take the license fee into account

when setting ice cream prices?