Paige initially has the only license to operate a bookstore in bookville. She ch
ID: 1099104 • Letter: P
Question
Paige initially has the only license to operate a bookstore in bookville. She charges a price of $9 per book, has an average cost of $4 per book, and sells 1,001 books per year. When Paige's license expires, the city decides to auction two bookstore licenses to the highest bidders. Suppose the relevant variables (price, average cost, and output per firm) take on only integer values--no fraction or decimals.
Suppose paige is optimistic and imagines the best possible outcome with a two-firm market. What is the maximum amount she is willing to pay for one of the two licenses?
Explanation / Answer
charge price per book = $9
avarage cost per book = $4
now the avarage profit she gain against one book is = $9 - $4
=$5
she sells 1001 books
so total profit is = 1001* $5
=$5005
now the total cost of the books is $= $1001 * 4
= $4004
=> so the maximum amount she pay for one of two license = $5005 - $4004
=$1001 .........answer
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.