Question

Q1. Recall Tourist-natives model. Every night, all 60 inhabitants of a tiny village visit one of the village's two taverns (not necessarily the same tavern) and an average of 10 strangers do the same. Both the villagers and the strangers are willing to pay up to $3 for a drink, and no one ever buys more than one. But, whereas the stranger pick either of the taverns at random, the villagers compare prices and go where the drinks are cheapest. (Hint: 36.75/?+0.1+0.03?=3 when ?=15 If the market i in free-entry equilibrium and each tavern's cost of providing q drinks a night are ?(?)=36.75+0.1?+0.03?2, the taverns charge [ ] for a drink. ( Round off to two decimal places).

Q2. Consider the village in Q1.

Suppose that the village suddenly becomes a tourist attraction and an average of 75 strangers visit every night. With this increased number of tourists, new taverns enter, and in the new (free-entry) equilibrium, there are two types of taverns with a high and a low prices. How many taverns offer the high price and how much do they charge for a drink? How many drinks does each of high-priced taverns sell a night? How many taverns offer the low price and how much do they charge for a drink? How many drinks does each of low-priced taverns sell a night? Fill the blanks[ ] below. (Answer prices with decimals.)

There are [ ] high-priced taverns which charge $[ ] for a drink. Each of them sells [ ] drinks a night.

There are [ ] low-priced taverns which charge $[ ] for a drink. Each of them sells [ ] drinks a night.

I know this question does not have enough info and I cannot solve for the question 2 but I do not know what else I need to solve it.

Answer 1