My dear not hand written 12 QuestionSee page 444Demand for alcohol has been present for much of human history, but supply has faced many forms of restriction for a variety of reasons. Consider acompetitive market for wine, where the costs of a typical supplier can be represented by the function c(y) = 125 + 5y², where y represents bottlesof wine produced.Part 1What is the long-run equilibrium price per bottle of wine? SiSee Hint@cit Part 2We know that competitive markets lead to the lowest possible price and thus the largest quantity demanded, which is often a goodeconomic outcome. In the case of alcohol, however, consumption of large quantities can lead to negative effects.See HintSuppose that many citizens of a wine-producing (and-consuming) region are frustrated with public drunkenness and lobby theirrepresentatives to somehow limit the consumption of alcohol. The local government thus decides to require licenses for any firms thatwish to produce wine in order to restrict production and also ensure quality. The price of a license is set at $55.In the short run, existing firms have to pay for the license, but the price of wine does not change. What are the short-run profits for atypical firm if the price of wine is the same as in Part 1 and firms must also purchase a license? SPart 3What will be the long-run equilibrium price with the license requirement in place? SSee Hint

Step: 1(Part 1)In the long run, the price of wine will be $150 per bottle. This is because the price…

12 Question See page 444 Demand for alcohol has been present for much of human history, but supply has faced many forms of restriction for a variety of reasons. Consider a competitive market for wine, where the costs of a typical supplier can be represented by the function c(y) = 125 + 5y, where y represents bottles of wine produced. Part 1 What is the long-run equilibrium price per bottle of wine? S See Hint

12 Question See page 444 Demand for alcohol has been present for much of human history, but supply has faced many forms of restriction for a variety of reasons. Consider a competitive market for wine, where the costs of a typical supplier can be represented by the function c(y) = 125 + 5y, where y represents bottles of wine produced. Part 1 What is the long-run equilibrium price per bottle of wine? S See Hint

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.3P

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