If a city decides to restrict the number of pizza parlors,
A) the price of pizza will increase.
B) pizza parlors will make higher profits.
C) total welfare will decrease.
D) All of the above.

Question

Quizplus · Accepted Answer

Restricting the number of pizza parlors reduces competition, likely leading to higher prices as each parlor faces less pressure to keep prices low. Higher prices can increase profits for the parlors that remain, assuming demand remains relatively inelastic. However, this reduction in competition and increase in prices can lead to a decrease in total welfare, as consumers pay more for pizza and have fewer choices, potentially leading to a loss in consumer surplus.

If a City Decides to Restrict the Number of Pizza