AOF is the only firm selling beer around Isla Vitas, which has a beer fountain in the backyard so the marginal cost of producing beer is 0. There are two groups of consumers: students and non students. The students' beer inverse demand function is p=50-5q, and the non-students' beer inverse demand function is p=10-2q. AOF sells beer in two sizes: 10 ounces bottle and 5 ounces can. Due to a local act, the consumers can only buy either 1 bottle or 1 can of beer. AOF can charge different prices on each bottle and each can of beer, while it cannot tell whether a customer is a student or not. In order to maximize the profits, how much should AOF charge its 10 ounces bottle? Answer: 87.5

AOF is the only firm selling beer around Isla Vitas, which has a beer fountain in the backyard so the marginal cost of producing beer is 0. There are two groups of consumers: students and non students. The students' beer inverse demand function is p=50-5q, and the non-students' beer inverse demand function is p=10-2q. AOF sells beer in two sizes: 10 ounces bottle and 5 ounces can. Due to a local act, the consumers can only buy either 1 bottle or 1 can of beer. AOF can charge different prices on each bottle and each can of beer, while it cannot tell whether a customer is a student or not. In order to maximize the profits, how much should AOF charge its 10 ounces bottle? Answer: 87.5

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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AOF is the only firm selling beer around Isla Vitas, which has a beer fountain in the backyard so the marginal cost of producing beer is 0. There are two groups of consumers: students and non students. The students' beer inverse demand function is p = 60 – 6q , and the non-students' beer inverse demand function is p = 10 – 2q. AOF sells beer in two sizes: 10 ounces bottle and 5 ounces can. Due to a local act, the consumers can only buy either 1 bottle or 1 can of beer. AOF can charge different prices on each bottle and each can of beer, while it cannot tell whether a customer is a student or not. In order to maximize the profits, how much should AOF charge its 10 ounces bottle? Answer: 37.5 The correct answer is: 100.0
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