Question

In the town of linsberg, chuck is the only craft brewer. in the neighboring town of krugerville, justin and tom each run a craft brewery and compete for customers. which town is likely to have higher prices and greater deadweight loss?

Answer 1

The town of linsberg would be the town that has higher prices and greater deadweight loss. This decision is plausible since Chuck is the only person in the town who runs a craft brewery and such exclusivity would mean he can raise higher prices since no competition is available to haggle prices in order to get costumers. He would have the greater deadweight loss since there would be a inefficiency in allocation resources and may cause him to monopolize the resources and business.