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5. Optimal price in San Antonio You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in Q2 to calculate separate optimal prices in the two locations. For your costs in San Antonio, you have fixed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your cost function in San Antonio? B. Using the demand function from Q2, calculate the profit maximizing price and quantity. Is the new price higher or lower than the price if you do not price discriminate? Is this consistent with your answer from Q3? What are your profits in San Antonio? C.

5. Optimal price in San Antonio You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in Q2 to calculate separate optimal prices in the two locations. For your costs in San Antonio, you have fixed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your cost function in San Antonio? B. Using the demand function from Q2, calculate the profit maximizing price and quantity. Is the new price higher or lower than the price if you do not price discriminate? Is this consistent with your answer from Q3? What are your profits in San Antonio? C.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question

Given

Question #1

  1. Cost function C= 3000+6Q
  2. Q = 4400 - 200Q - This is the demand function
  3. Q= 1600 P = 14
  4. Profit= 22400-12600 = 9800

 

Question #2 

  1. Q=$480 - L
  2. Q=$1120- SA

Question #3

  1. Ed=−1.25 - L
  2.  Ed=−0.55 - SA
  3. 0.5<0.8− markup index it is charging less. - L
  4. 0.64<-1/-0.55--markup index it is charging less. - SA

Please answer question #5  A-C

Given 

Question #2

Demand Function for San Antiono - Q=$1120- SA

Question #3 

Elasticity of Demand - Ed=−0.55 

Markup - 0.64<-1/-0.55--markup index it is charging less

 

5. Optimal price in San Antonio You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in Q2 to calculate separate optimal prices in the two locations. For your costs in San Antonio, you have fixed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your cost function in San Antonio? B. Using the demand function from Q2, calculate the profit maximizing price and quantity. Is the new price higher or lower than the price if you do not price discriminate? Is this consistent with your answer from Q3? What are your profits in San Antonio? C.
Transcribed Image Text:5. Optimal price in San Antonio You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in Q2 to calculate separate optimal prices in the two locations. For your costs in San Antonio, you have fixed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your cost function in San Antonio? B. Using the demand function from Q2, calculate the profit maximizing price and quantity. Is the new price higher or lower than the price if you do not price discriminate? Is this consistent with your answer from Q3? What are your profits in San Antonio? C.
2. Demand across the two locations - After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then break down sales across the two locations. In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13. In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 3. A. Using the two prices above, estimate your demand function in Laredo. What would demand be at the optimal price from Q1 B. Using the two prices above, estimate your demand function in San Antonio. What would demand be at the optimal price from Q1? Elasticities across the two locations A. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in San Antonio C. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in Laredo Hint: Calculate markup on price (Lerner's index) and compare it to - from earlier question Ed D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio Hint: Calculate markup on price (Lerner's index) and compare to 1 Ed from earlier question E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio
Transcribed Image Text:2. Demand across the two locations - After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then break down sales across the two locations. In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13. In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 3. A. Using the two prices above, estimate your demand function in Laredo. What would demand be at the optimal price from Q1 B. Using the two prices above, estimate your demand function in San Antonio. What would demand be at the optimal price from Q1? Elasticities across the two locations A. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elasticity of demand at the optimal price for Q1 (and quantity from Q2) in San Antonio C. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in Laredo Hint: Calculate markup on price (Lerner's index) and compare it to - from earlier question Ed D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio Hint: Calculate markup on price (Lerner's index) and compare to 1 Ed from earlier question E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio
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