Question of Economics ? help please ?

Question

Initially, we have a market of 400 night shops in Brussels. All the competitive firms have a

positive profit in the SR. Show this on a graph.

The regional government of Brussels decides to limit the number of night shops in Brussels.

There will only be 300 night shops and all of them are required to get a license from the

government.

How is the license going to change the individual situation of each night shop?

In order to maximize its revenues, which price should the government impose for the license? of course you don't have to draw the graph but help me to answer this question please

Answer 1

mr slopes downward...marginal cost sloped upward....basically draw a supply and demand curve and label the curves as such (mr and mc).  Now, the demand curve for a perfectly competitive firm is horizontal.  The reason for this being that the firms takes the price as given and the demand for their product is perfectly elastic.  Ok, in order for there to be profits, the demand curve has to lie above the intersection the mr and mc curves.  In particular, it is important to remember that the MC surve is the supply curve for the firm.  

The license is going to cause the market supply curve to shift to the left because there will be less firms supplying the product.  The price will go up for each shop.

I think I covered everything.