For the past nine months, Iliana has been producing artisanal ice creams from her small shop in
Question:
She's been just breaking even (earning zero economic profit) that entire time. This morning, the state Board of Health informed her that they are doubling the annual fee for the dairy license she operates under, retroactive to the beginning of her operations.
a. In the short run, how will this fee increase affect Iliana's output level? Her profit?
b. In the long run, how will this fee increase affect Iliana's output level?
c. Suppose that instead of doubling the annual fee for a license, the state Board of Health required Iliana to treat every pint of ice cream to prevent the growth of bacteria. How would this stipulation affect Iliana's production decision and profit in both the short and long run?
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a The increase in the fee will reduce Ilianas profits but will not change he...View the full answer
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Microeconomics
ISBN: 9781464146978
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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