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a. How much should George charge if he must charge a single price to all customer? At this price, how many portraits will George produce each day? What will be his economic profit? b. How much consumer surplus is generated each day at this price

a. How much should George charge if he must charge a single price to all customer? At this price, how many portraits will George produce each day? What will be his economic profit? b. How much consumer surplus is generated each day at this price

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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a. How much should George charge if he must charge a single price to all customer? At this price, how many portraits will George produce each day? What will be his economic profit?
 
b. How much consumer surplus is generated each day at this price?
TotsPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume George has no fixed costs, and his cost of producing each portrait is $12. **Customer vs. Reservation Price Table:** | Customer | Reservation Price ($ per photo) | |----------|----------------------------------| | 1 | 50 | | 2 | 46 | | 3 | 42 | | 4 | 38 | | 5 | 34 | | 6 | 30 | | 7 | 26 | | 8 | 22 | **Explanation of the Table:** The table lists potential customers along with their maximum willingness to pay for a portrait, referred to as the reservation price. Each customer has a different reservation price, indicating the maximum they are willing to pay per photo. Understanding these prices can help George determine the optimal pricing strategy to maximize profits.
Transcribed Image Text:TotsPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume George has no fixed costs, and his cost of producing each portrait is $12. **Customer vs. Reservation Price Table:** | Customer | Reservation Price ($ per photo) | |----------|----------------------------------| | 1 | 50 | | 2 | 46 | | 3 | 42 | | 4 | 38 | | 5 | 34 | | 6 | 30 | | 7 | 26 | | 8 | 22 | **Explanation of the Table:** The table lists potential customers along with their maximum willingness to pay for a portrait, referred to as the reservation price. Each customer has a different reservation price, indicating the maximum they are willing to pay per photo. Understanding these prices can help George determine the optimal pricing strategy to maximize profits.
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