Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5, and that Curly has now begun operating a hot dog cart. We can assume that:

Question

Quizplus · Accepted Answer

It is safe to assume that Curly would only enter the market if he can make a profit by selling hot dogs. With the price of hot dogs being $5, it is reasonable to assume that Curly's reservation price is greater than $4.50, as selling at that price would not yield any profit. However, we cannot assume that his reservation price is exactly $5 since he may be willing to sell at a slightly lower price in order to attract customers and build his business. Therefore, the best choice is C, which says that Curly's reservation price is greater than $4.50 but no more than $5.

Suppose That the Market Price for Hot Dogs Sold by Street