Starbucks entered the London UK market in May 1998. Consider the company’s location decision along Oxford Street in downtown London between the Marble Arch underground station and the Oxford Circus underground station—a distance of exactly one mile. Suppose on a typical day there are 1,000,000 consumers located along this extremely busy stretch of Oxford Street at some point in the day. Further, suppose the reservation price for the typical Londoner for a cup of Starbucks coffee was £2.00 for which the marginal cost of production was £0.50. In addition, the round trip transportation costs for a typical Londoner walking around London was £1.00 per mile and the fixed costs of setting up an additional Starbucks café equal £10,000. To maximize profit, how many Starbucks would the company locate along this stretch of Oxford Street? Where would they be located? From a social standpoint is this the optimal number of Starbucks to have located along that 1-mile stretch? If not what is the optimal number of Starbucks? What price will Starbucks charge for a cup of coffee? What would be the socially optimal price of a cup of coffee if Starbucks operated the socially optimal number of cafes? If you have been to London, you will realize that these results are fairly consistent with the actual number of Starbucks in downtown London and the actual price too.