5. Optimal price in San Antonio You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in Q2 to calculate separate optimal prices in the two locations. For your costs in San Antonio, you have fixed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your cost function in San Antonio? B. Using the demand function from Q2, calculate the profit maximizing price and quantity. Is the new price higher or lower than the price if you do not price discriminate? Is this consistent with your answer from Q3? C. What are your profits in San Antonio?
Given
Question #1
- Cost function C= 3000+6Q
- Q = 4400 - 200Q - This is the
demand function - Q= 1600 P = 14
- Profit= 22400-12600 = 9800
Question #2
- Q=$480
- Q=$1120
Question #3
- Ed=−1.25
- Ed=−0.55
- 0.5<0.8− markup index it is charging less.
- 0.64<-1/-0.55--markup index it is charging less.
Please answer question #5 A-C
5. Optimal
You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in Q2 to calculate separate optimal prices in the two locations.
For your costs in San Antonio, you have fixed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.)
A. What is your cost function in San Antonio?
B. Using the demand function from Q2, calculate the profit maximizing price and quantity. Is the new price higher or lower than the price if you do not
C. What are your profits in San Antonio?
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