Explain why the price of grooming licenses was zero

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Zero Price for a Permit. Consider a city that initially issues five licenses to pet groomers and does not allow the licenses to be bought and sold. Shortly after an economist joins the city licensing authority, the city decides to allow the licenses to be bought and sold on the open market. Much to the surprise of the licensers, the price of the licenses was zero: No one was willing to pay a positive amount for a pet grooming license.

a. Explain why the price of grooming licenses was zero.

b. Illustrate your answer with a complete graph.

Reference no: EM131132861

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