KidzPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. James, who owns and runs KidzPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume James has no fixed costs, and his cost of producing each portrait is $12. Customer Reservation Price ($ per photo) 1 50 2 46 3 42 4 38 5 34 6 30 7 26 8 22 How much should James charge if he must charge a single price to all customer? At this price, how many portraits will James produce each day? What will be his economic profit? James should charge How much consumer surplus is generated each day at this price? If James is very experienced and knows the reservation prices of each customer, how many portraits will he produce each day and how much economic profit will he earn?
KidzPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. James, who owns and runs KidzPoses, expects to encounter an average of eight customers per day, each with a reservation
Customer Reservation Price ($ per photo)
1 50
2 46
3 42
4 38
5 34
6 30
7 26
8 22
How much should James charge if he must charge a single price to all customer? At this price, how many portraits will James produce each day? What will be his economic profit? James should charge
How much
If James is very experienced and knows the reservation prices of each customer, how many portraits will he produce each day and how much economic profit will he earn?
Assume James charges only 2 different prices. He know that customers with reservation prices above $30, will never use coupons and the customers with reservation prices below will always use coupons. What price should James charge for portraits and what discount should he offer on the coupon?
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