## (Solution Document) Bidding for Bookstore Licenses. Paige initially has the only license to operate a bookstore in Bookville.

Bidding for Bookstore Licenses. 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 ?\$2 per? book, and sells 501 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 long dash no fraction or decimals.

a. 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?

?\$

?(Hint: How will the relevant variables? change? What is the smallest possible change in their? values?)

b. Suppose Paige is pessimistic and imagines the worst possible outcome with a? two-firm market. What is the maximum amount she is willing to pay for one of the two? licenses?

STATUS