You are the manager of a pizzeria that produces at a marginal cost of $6 per pizza. The pizzeria is a local monopoly near campus (there are no other restaurants or food stores within 500 miles). During the day, only students eat at your restaurant. In the evening, while students are studying, faculty members eat there. If students have an elasticity of demand for pizzas of −4 and the faculty has an elasticity of demand of −2, what should your pricing policy be to maximize profits?

You are the manager of a pizzeria that produces at a marginal cost of $6 per pizza. The pizzeria is a local monopoly near campus (there are no other restaurants or food stores within 500 miles). During the day, only students eat at your restaurant. In the evening, while students are studying, faculty members eat there. If students have an elasticity of demand for pizzas of −4 and the faculty has an elasticity of demand of −2, what should your pricing policy be to maximize profits?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 4E

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