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To maximize its profit, what prices P2 and P5 should Woolworths choose?

To maximize its profit, what prices P2 and P5 should Woolworths choose?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Woolworths has two types of milk packages: 2 litres and 5 litres. There are two types of customers: small families and large families. There are 200 small families and 100 large families. A small family's value is 5 for the 2 litre milk and 6 for the 5 litre milk; a large family's value is 6 for the 2 litre milk and 10 for the 5 litre milk. Woolworths does not know whether a customer has a small family or large family. The marginal cost per litre is 1. Suppose the price for the 2-litre milk is P2, and the price for the 5-litre milk is P5. If a family does not purchase milk, it gets a value of 0.

 

Q. To maximize its profit, what prices P2 and P5 should Woolworths choose?

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