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In: Economics

You own a fast food restaurant and must decide on a pricing strategy for burgers and...

You own a fast food restaurant and must decide on a pricing strategy for burgers and fries. Marginal production costs are constant at $1 for burgers and $0.50 for fries. The market you serve contains equal numbers of 3 types of consumers called “Average”, “Burger Buffs”, and “Fries Fiends”. Each consumer will purchase at most 1 of each food type. Their valuations of the two goods are listed in the following table.

Consumer Types Burger Fries B+F bundle deal

Average

 5.55 8 13.33
Burger Buff 12 3 15
Fries Friends 3 11 14

What are the optimal mixed bundle prices if you allow consumers to buy the meal or to buy a burger or fries separately

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