Question

Restaurant Pricing. Consider a restaurant that charges $10 for all, you can eat and has 20 customers at this price. The slope of the demand curve is minus−​$0.20 per​ meal and the marginal cost of providing a meal is ​$66.

​1.) Use the line drawing tool to draw and label the demand line.

​2.) Use the line drawing tool to draw and label the marginal revenue line.

​3.) Use the line drawing tool to draw the marginal cost line.

Carefully follow the instructions​ above, and only draw the required objects.

The​ profit-maximizing quantity is __ meals. ​(Enter your response rounded to the nearest​ unit.)

The​ profit-maximizing price is ​$___. ​(Enter your response rounded to the nearest​ dollar.)

Answer 1

​​​​​​Note: the marginal cost (MC) cannot be 66 as this will make the porfit maximising quantity negative. Hence it is a typo and MC should be $6.

This can also be seen graphically. In the above graph, the prfit is maximised where MR= MC, that is, where MR and MC curves intersect at point E. The quantity is 20 and the Correpnding price on the demand curve is $10