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 customer8 am customerCoffee 0.700.60 Donut0.50 1.00Bundle1.20 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.

Bundle pricing is a method in which producers bundle there different goods and charge a single price…

Answered: You run a donut shop. You have two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 price your bundle? Show all your computations.

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