You run a donut shop. You have two types of customers – early morning, and late morning. Below are the maximum prices a 6 am customer and a 10 am customer are willing to pay for a cup of coffee, a donut, and a coffee/donut bundle. There are 100 customers in each group per day. 6 am customer 8 am customer Coffee 0.70 0.60 Donut 0.50 1.00 Bundle 1.20 1.60 Your marginal cost of coffee is $0.10. Your marginal cost of a donut is $0.40. Your marginal cost of a bundle is $0.50. Is pricing the products separately more profitable than bundling the two products? If so, how should you price your bundle? Show all your computations.
You run a donut shop. You have two types of customers – early morning, and late morning. Below are the maximum prices a 6 am customer and a 10 am customer are willing to pay for a cup of coffee, a donut, and a coffee/donut bundle. There are 100 customers in each group per day. 6 am customer 8 am customer Coffee 0.70 0.60 Donut 0.50 1.00 Bundle 1.20 1.60 Your marginal cost of coffee is $0.10. Your marginal cost of a donut is $0.40. Your marginal cost of a bundle is $0.50. Is pricing the products separately more profitable than bundling the two products? If so, how should you price your bundle? Show all your computations.
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.4P
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You run a donut shop. You have two types of customers – early morning, and late morning. Below are the maximum prices a 6 am customer and a 10 am customer are willing to pay for a cup of coffee, a donut, and a coffee/donut bundle. There are 100 customers in each group per day.
6 am customer | 8 am customer | |
Coffee | 0.70 | 0.60 |
Donut | 0.50 | 1.00 |
Bundle | 1.20 | 1.60 |
Your marginal cost of coffee is $0.10. Your marginal cost of a donut is $0.40. Your marginal cost of a bundle is $0.50.
Is pricing the products separately more profitable than bundling the two products? If so, how should you
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