Guards patrolling a mall protect the malls two stores. The television stores demand curve for guards is

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Guards patrolling a mall protect the mall’s two stores. The television store’s demand curve for guards is strictly greater at all prices than that of the ice-cream parlor. The marginal cost of a guard is $ 20 per hour. Use a diagram to show the equilibrium, and com-pare that to the socially optimal equilibrium. Now suppose that the mall’s owner will provide a $ s per hour subsidy per guard. Show in your graph the optimal s that leads to the socially optimal outcome for the two stores.

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Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

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