A college town considers lifting a ban on food trucks around college. Once the ban is lifted, food trucks will be able to compete with restaurants near college. Suppose that before the ban is lifted, the food market near campus is in a long run competitive equilibrium. Given this assumption, what will be the effect of lifting the ban on food trucks on food prices near college in the short run and in the long run? And what will be the effect on restaurants? Explain your answer in detail. When answering the question, you should take into account that the cost of putting a food truck on the road is far less than the investment required to build a brick-and-mortar restaurant. According to a story published in FastCasual.com in November 2015, the cost of a food truck ranges from $45,000 for an old used truck to $150,000 for a truck with a top of the line kitchen, while the cost of a brick-and mortar restaurant is up to a million dollars.

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In the short run lifting the ban on food trucks near the college would likely lead to a decrease in ... View the full answer