Chapter 10.3, Problem 43E

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11th Edition

Ronald J. Harshbarger + 1 other

ISBN: 9781305108042

Textbook Problem

Coastal Soda Sales has been granted exclusive market rights to the upcoming Beaufort Seafood Festival. This means that during the festival, Coastal will have a monopoly, and it is anxious to take advantage of this position in its pricing strategy. The daily demand function is

*x* is the number of units.

(a) Determine Coastal's total revenue and profit functions.

(b) What profit-maximizing price per soda should Coastal charge, how many sodas per day would it expect to sell at this price, and what would be the daily profits?

(c) If the festival organizers wanted to set an economically efficient price of $1.25 per soda, how would this change the results from part (b)? Would Coastal be willing to provide sodas for the festival at this regulated price? Why or why not?

**(a)**

To determine

**To calculate:** The Coastal’s total revenue and profit functions if the Coastal soda sales has granted exclusive market rights for the upcoming Beaufort Seafood Festival.

Explanation

**Given information:**

The provided information is:

The Coastal soda sales granted exclusive market rights for the upcoming Beaufort Seafood Festival, that means during festival, the Coastal will have monopoly, and which is anxious to take advantage of this position in its pricing strategy.

**Formula used:**

The daily demand function is:

The daily cost function is:

**Calculation:**

Consider the provided information.

The daily demand function is:

The daily cost function is:

Find out the Coastalâ€™s total revenue as:

Hence, the Coastalâ€™s total revenue is

**(b)**

To determine

**To calculate:** The profit maximizing price per soda should Coastal charge, the number of sodas per day would it expect to sell at this price, and the daily profits if the Coastal soda sales has granted exclusive market rights for the upcoming Beaufort Seafood Festival.

**(c)**

To determine

**To calculate:** The Coastal want to provide sodas for the festival at the regulated price if the festival organizers wanted to set an economically efficient price of

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