In the area around a local university, a number of food
Question and Solution
In the area around a local university, a number of food vendors gather each lunchtime to sell food to university student
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In the area around a local university, a number of food vendors gather each lunchtime to sell food to university students who are tired of dorm food. The university and the town have no license fees that apply to food vendors, preferring to let the market dictate how many and which vendors show up. Many different cuisines are represented on the street corner, including a cart sponsored by Madame Defarge selling gumbo and jambalaya. Madame Defarge sells a plate of either gumbo or jambalaya for $5. The food is made in the morning at her nearby restaurant, when the kitchen is otherwise unoccupied. Her crew of three, each of whom earns $15 per hour, takes 2 hours to make the 100 meals required by Madame Defarge. In creating these meals, they use ingredients equal to $100. Madame Defarge hires another worker to load her cart with food and sell it during the lunch hours. That worker costs $10 per hour and typically sells out the entire cart of 100 meals in 2 hours. The cart is rented for $100 per 5-day week. (The carts are not in operation on the weekends, when Madame Defarge is too busy at her restaurant.) a. What market structure does this business most resemble? What characteristics lead you to this conclusion? b. What would you expect to see happen in this business? Use the data in the problem to support your conclusions. c. How would your calculations change if Madame Defarge were to develop a weekday lunch business that used the kitchen
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