Problem 14.2 The Magic Potion: A chemist is already producing 200 doses. Should she produce and sell another dose for $301?

Quantity ATC TC

199

200

201

$199/dose

200/dose

201/dose

$39,601

40,000

40,401

Problem 14.6

Strong prices traditionally cause expansion in an industry, eventually bringing an end to high prices. EXPLAIN.

Problem 14.9 Pretzel VendersSuppose there are 1,000 hot pretzel stands in NY, each with U-shaped ATCs. Demand is downward sloping and the market is initially in long-run competitive equilibrium.

Draw current equilibrium for representative firm and for the industry.

NYC now licenses only 800 stands. Show impacts on the market and on the individual stand that is still operating.

Now NYC charges license fee for the 800 licenses. – How does this affect each stand’s sales & profit?– How high should the license fee be to max. NYC’s fee

revenue?