Every candle maker in Town A must have a license. The cost of a license is the
Question:
a. Assuming that the candle market is perfectly competitive:
i. Does this license shift a candle maker’s short-run average fixed cost curve?
ii. Does this license shift a candle maker’s short-run average variable cost curve?
iii. Does this license shift a candle maker’s short-run profit maximizing choice of the number of candles to produce?
b. Candle makers in Town B do not need a license. Town B, however, has passed a new minimum wage law that increases the wages that candle makers in Town B pay their workers. Assuming that the candle market is perfectly competitive:
i. Does this minimum wage shift a candle maker’s short-run average fixed cost curve?
ii. Does this minimum wage shift a candle maker’s short-run average variable cost curve?
iii. Does this minimum wage shift a candle maker’s short-run profit maximizing choice of the number of candles to produce?
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a Town A i The license is a fixed cost ie it is the same regardless of the number of candles the fir...View the full answer
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