Bidding for Bookstore Licenses. Paige initially has the only license to operate a bookstore in Bookville. She charges a price of $9 per book, has an average cost of $4 per book, and sells 1,001 books...

Bidding for Bookstore Licenses. Paige initially has the only license to operate a bookstore in Bookville. She charges a price of $9 per book, has an average cost of $4 per book, and sells 1,001 books per year. When Paige’s license expires, the city decides to auction two bookstore licenses to the highest bidders. Suppose the relevant variables (price, average cost, and output per firm) take on only integer values—no fractions or decimals.

a. Suppose Paige is optimistic and imagines the best possible outcome with a two-firm market. What is the maximum amount she is willing to pay for one of the two licenses?

b. Suppose Paige is pessimistic and imagines the worst possible outcome with a two-firm market. What is the maximum amount she is willing to pay for one of the two licenses?