A catering monopoly runs 10 restaurants in the National Park. The park attracts V = 650 visitors a day and employs E = 49 people. All visitors eat only one meal at a randomly chosen restaurant and, because they are on vacation, are willing to pay up to €12 for that meal. The employees also eat only one meal a day, but at the cheapest restaurant and only if the meal costs no more than €5. Show that if the monopoly's MC is constant at €2 per meal, its optimal pricing policy is such that no employee ever eats at the restaurants. How far would the number of visitors per day have to drop for patronage by the employees to become interesting to the monopoly?

A catering monopoly runs 10 restaurants in the National Park. The park attracts V = 650 visitors a day and employs E = 49 people. All visitors eat only one meal at a randomly chosen restaurant and, because they are on vacation, are willing to pay up to €12 for that meal. The employees also eat only one meal a day, but at the cheapest restaurant and only if the meal costs no more than €5. Show that if the monopoly's MC is constant at €2 per meal, its optimal pricing policy is such that no employee ever eats at the restaurants. How far would the number of visitors per day have to drop for patronage by the employees to become interesting to the monopoly?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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