Restaurant Pricing. Consider a restaurant that charges $10 for all, you can eat and has 20...

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.)

Solutions

Expert Solution

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

Rahul Sunny answered 1 year ago

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