Answered: Tasty Inc. sells table salt to both…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Tasty Inc. sells table salt to both retail grocery chains and commercial users (e.g., bakeries, snack food makers, etc.). The demand function for each of these markets is:

	Retail grocery chains:	P₁ = 180 − 8Q₁
	Commercial users:	P₂ = 100 − 4Q₂

where P₁ and P₂ are the prices charged and Q₁ and Q₂ are the quantities sold in the respective markets. Tasty's total cost function (which includes a "normal" return to the owners) for salt is:

TC = 50 + 20(Q₁ + Q₂)

(a)	Determine Tasty's total profit function.
(b)	Assuming that Tasty Inc. is effectively able to charge different prices in the two markets, what are the profit-maximizing price and output levels for the product in the two markets? What is Tasty's total profit under this condition?

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