A city may limit the number of liquor licenses for restaurants in many ways. It could issue a license that the owner keeps forever and that can be resold.Or, it could charge a high license fee each year, which is equivalent to the city’s issuing a license that lasts only a year. A third option is to charge a daily tax on restaurants that serve liquor. Use figures to compare and contrast the equilibrium under each of these approaches. Discuss who wins and who loses from each plan, considering consumers, drivers, the city, and (if relevant) medallion owners.
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