You are the manager of a bakery that produces and packages bran buns. According to the new research, a typical consumer's inverse demand function for your bran buns is P = 4-0.5Q . Your cost of producing bran buns is C (Q) = 1Q . a) Determine the optimal number of bran buns to sell in a single package and the optimum package price. Find profits you earn. b) Suppose your company sells buns charging per-unit price. Find the profit-maximizing price. c) Compare profits your company would earn using the strategy of one price (b) with profits generated in (a).
You are the manager of a bakery that produces and packages bran buns. According to the new research, a typical consumer's inverse demand function for your bran buns is P = 4-0.5Q . Your cost of producing bran buns is C (Q) = 1Q . a) Determine the optimal number of bran buns to sell in a single package and the optimum package price. Find profits you earn. b) Suppose your company sells buns charging per-unit price. Find the profit-maximizing price. c) Compare profits your company would earn using the strategy of one price (b) with profits generated in (a).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You are the manager of a bakery that produces and packages bran buns. According to the new research, a typical consumer's inverse
a) Determine the optimal number of bran buns to sell in a single package and the optimum package
b) Suppose your company sells buns charging per-unit price. Find the profit-maximizing price.
c) Compare profits your company would earn using the strategy of one price (b) with profits generated in (a).
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