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Q. A local restaurateur whose trade had been profitable for many years recently purchased a liquor license, giving her a legal right to sell beer, wine also spirits at the restaurant. The license cost $75,000. While the license is transferable, only $65,000 is refundable if the owner chooses not to utilize it. After selling alcoholic beverages for about a year the owner realized she was losing dinner clients also to her formerly profitable restaurant was becoming a noisy, unprofitable bar. Subsequently, she spent $6000 on advertisements in local newspapers also magazines offering to sell the license for $70,000. After a long wait, she received one offer to purchase the license for $66,000. Would you recommend she accept the $66,000 offer? Explain why or explain why not? Elucidate.
Assume that over a range of prices, the price elasticity of demand varies, total revenue curve over these two ranges of the demand curve as price fall.
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