An ice
cream company is going to open businesses in Linear City. The

city has
a population of 2,000 people, all of whom enjoy ice cream and get a utility
level

of $10
from a scoop of ice cream. The city is 1 mile long and the people are uniformly

distributed
across the city. City addresses run from 0 to 1 from left to right. There-

and-back
travel costs within the city are $1 per mile. A scoop of ice cream costs $2 to

produce.
For each store the ice cream company opens, it incurs fixed cost of 50.

1. Show
that, even if the ice cream shop open up only one store, it is optimal to sell

ice cream
to the entire market.

2. Write
down an expression for total profit when the firm optimally locates and sets

prices
fornstores.

3.
Suppose the ice cream firm opens 5 stores, what would be the optimal locations

for these
stores? What would be the profits of the ice cream store.

4. How
many stores should the monopolist open?

5. Write
down an expression for total costs that a social planner would like to minimize in
this market.

6. What is the socially efficient
number of stores to open?

ScholarMatic: Explanation & Answer

Your ready answer from a verified tutor is just a click away for as little as $14.99

---

  

Click Order Now to get 100% Original Answer Customized to your instructions!