6. The Crispy-Cola Corp. (CCC) wants to expand into selling its cans of cola via vending machines and is considering renting "smart" vending machines that can be programmed to change the price of a can of Crispy-Cola according to the outside temperature. Suppose that the temperature can be either "High" or "Low". On "High" temperature days, the demand is Q = 280-2p, where Q is the number of cans of Crispy-Cola per day that are sold per machine and p is the price per can in cents. On "Low" temperature days, the demand is Q = 160 - 2p. There are an equal number of "High" and "Low" days during a calendar year. The marginal cost of producing and delivering a can of Crispy-Cola to vending machine locations is 20 cents. a. Suppose that CCC rents the smart machines. What is the profit-maximizing price that CCC should charge on "High" days? What price should CCC charge on "Low" days? Explain. b. Suppose that CCC instead rents "dumb" machines that can be programmed for only a single price regardless of the weather. For this alternative, what is the profit-maximizing price that CCC should charge? Explain c. On a per-day basis, what is the maximum additional rent that CCC should be willing to pay for renting a smart vending machine versus a dumb vending machine? Explain.
6. The Crispy-Cola Corp. (CCC) wants to expand into selling its cans of cola via vending machines and is considering renting "smart" vending machines that can be programmed to change the price of a can of Crispy-Cola according to the outside temperature. Suppose that the temperature can be either "High" or "Low". On "High" temperature days, the demand is Q = 280-2p, where Q is the number of cans of Crispy-Cola per day that are sold per machine and p is the price per can in cents. On "Low" temperature days, the demand is Q = 160 - 2p. There are an equal number of "High" and "Low" days during a calendar year. The marginal cost of producing and delivering a can of Crispy-Cola to vending machine locations is 20 cents. a. Suppose that CCC rents the smart machines. What is the profit-maximizing price that CCC should charge on "High" days? What price should CCC charge on "Low" days? Explain. b. Suppose that CCC instead rents "dumb" machines that can be programmed for only a single price regardless of the weather. For this alternative, what is the profit-maximizing price that CCC should charge? Explain c. On a per-day basis, what is the maximum additional rent that CCC should be willing to pay for renting a smart vending machine versus a dumb vending machine? Explain.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Transcribed Image Text:6. The Crispy-Cola Corp. (CCC) wants to expand into selling its cans of cola via vending machines
and is considering renting "smart" vending machines that can be programmed to change the price of
a can of Crispy-Cola according to the outside temperature.
Suppose that the temperature can be either "High" or "Low". On "High" temperature days,
the demand is Q = 280-2p, where Q is the number of cans of Crispy-Cola per day that are sold per
machine and p is the price per can in cents. On "Low" temperature days, the demand is Q = 160 -
2p. There are an equal number of "High" and "Low" days during a calendar year. The marginal cost
of producing and delivering a can of Crispy-Cola to vending machine locations is 20 cents.
a. Suppose that CCC rents the smart machines. What is the profit-maximizing price that CCC
should charge on "High" days? What price should CCC charge on "Low" days? Explain.
b. Suppose that CCC instead rents "dumb" machines that can be programmed for only a single
price regardless of the weather. For this alternative, what is the profit-maximizing price that CCC
should charge? Explain
c. On a per-day basis, what is the maximum additional rent that CCC should be willing to pay
for renting a smart vending machine versus a dumb vending machine? Explain.
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