1. Joe’s “Thirsty Buffalo” bar is the only watering hole in Twin City, IN. Fixing each drink costs Joe $2. His only other cost is paying $2000 a month for a liquor license.
Each drink sells at $5, and he sells 4,000 drinks a month.
Joe has heard on the street that Bob, who runs a bowling alley in town, is thinking about obtaining a liquor license and opening a bar in one of the wings of his building.
If Bob does that, then the price of a drink in Twin City is ex...