Answered: Write down the revenue function, cost…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter20: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 3CQ: Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates...

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Elsie sells homemade lemonade. If she prices a glass of lemonade at $3, she sells 12 glasses a day. If she gives a $0.50 discount (per glass), she can sell 3 more glasses per day.

Write a linear demand equation

q = mp + b,

where p is the price per glass, and q is the number of glasses she can sell per day.

Suppose that it costs her 20 cents a glass to make lemonade. There is no fixed cost.

Write down the revenue function, cost function, and profit function as functions of p. How much should she charge per glass to maximize her profit? What is the maximum profit?

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