Now suppose that the state of Alabama eliminates its system of licensing Alabama alligator sausage producers. That is, suppose that it is no longer necessary to obtain a license from the state in order to produce Alabama alligator sausage. Suppose that the demand for Alabama alligator sausage increases. In the short run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Explain your answers. In the long run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Compare the long-run equilibrium to the equilibrium that existed before the increase in demand. Explain your answers. Which is better – having the licensing requirements or not having them? Justify your answer, being sure to explain what you mean by “better.”

Equilibrium quantity and price is determined where market demand and supply is in equilibrium.…

Answered: Now suppose that the state of Alabama…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 16CQ

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Now suppose that the state of Alabama eliminates its system of licensing Alabama alligator sausage producers. That is, suppose that it is no longer necessary to obtain a license from the state in order to produce Alabama alligator sausage.

Suppose that the demand for Alabama alligator sausage increases.

In the short run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Explain your answers.

In the long run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Compare the long-run equilibrium to the equilibrium that existed before the increase in demand. Explain your answers.

Which is better – having the licensing requirements or not having them? Justify your answer, being sure to explain what you mean by “better.”

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