Imagine there are 2 hot dog vendors on a linear beach 100 yards long. Assume: Customers are evenly distributed along the beach, located at the endpoints and spaced 5 yards apart. Production costs are 0. Both vendors sell hot dogs for p dollars. The cost to consumers of travel is 2 cents per yard. a. What are the profit-maximizing equilibrium locations, if any, for the three vendors? If there is an equilibrium, what do aggregate travel costs equal? b. What are the socially optimal locations, if any, to minimize travel costs? If there is a social optimum, what do aggregate travel costs equal?

Imagine there are 2 hot dog vendors on a linear beach 100 yards long. Assume: Customers are evenly distributed along the beach, located at the endpoints and spaced 5 yards apart. Production costs are 0. Both vendors sell hot dogs for p dollars. The cost to consumers of travel is 2 cents per yard. a. What are the profit-maximizing equilibrium locations, if any, for the three vendors? If there is an equilibrium, what do aggregate travel costs equal? b. What are the socially optimal locations, if any, to minimize travel costs? If there is a social optimum, what do aggregate travel costs equal?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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