You are the manager of a pizzeria that produces at a marginal cost of $6 per pizza. The pizzeria is a local monopoly near campus (there are no other restaurants or food stores within 500 miles). During the day, only students eat at your restaurant. In the evening, while students are studying, faculty members eat there. If students have an elasticity of demand for pizzas of −4 and the faculty has an elasticity of demand of −2, what should your pricing policy be to maximize profits?
You are the manager of a pizzeria that produces at a marginal cost of $6 per pizza. The pizzeria is a local monopoly near campus (there are no other restaurants or food stores within 500 miles). During the day, only students eat at your restaurant. In the evening, while students are studying, faculty members eat there. If students have an elasticity of demand for pizzas of −4 and the faculty has an elasticity of demand of −2, what should your pricing policy be to maximize profits?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter14: Indirect Price Discrimination
Section: Chapter Questions
Problem 9MC
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You are the manager of a pizzeria that produces at a marginal cost of $6 per pizza. The pizzeria is a local
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