See page 351 11 Question(6 points) points) A fast-food restaurant has identified
ID: 1117095 • Letter: S
Question
See page 351 11 Question(6 points) points) A fast-food restaurant has identified three primary groups willing to purchase its meals. However, customers are willing to purchase only one meal each. The table shows the total number of meals bought at three different prices. The number of consumers is the total number of buyers at each price level. Group Number of consu High Medium 500 Low Willingness to pay $4.50 $4 $2 50 The restaurant can produce a meal with no fixed costs and a constant marginal cost of $1 per unit. 2nd attempt Part 1 (2 points) See Himt If the restaurant charges only one price for the meal, it will charge and receive a profit of $ Part 2 (2 points) See Hint Assume the firm can distinguish between customers and has the ability to charge different customers different prices. If the restaurant can perfectly price-discriminate, the highest price it will charge is $ are S . The total profits under perfect price discrimination Part 3 (2 points) See Hint Assume the firm can distinguish between customers and has the ability to charge different customers different prices. If the restaurant charges two prices, it will charge $4and and receive a profit of $Explanation / Answer
Profit = 900*3 = 2700.
If he sells at p= $2 net value = 1. Profit = 1*1650 =$1650. (All will buy)
If he sells at p=$4.50. The net value = (4.5-1) = $3.5. Profit = 3.5*400 = $1400. Since the profit is higher at P= $4. So he will charge P= $4 and earn a profit of $2700.
Profit = (4.5-1)*400+(4-1)*500+(2-1)*750 = 1400+1500+750.
Profit = 3650.
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