Beth is a second-grader who sells lemonade on a street corner in your neighborhood. Each cup of

Question:

Beth is a second-grader who sells lemonade on a street corner in your neigh¬borhood. Each cup of lemonade costs Beth 20 cents to produce; she has no fixed costs. The reservation prices for the 10 people who walk by Beth's lem¬onade stand each day are listed in the following table.

Beth knows the distribution of reservation prices (that is, she knows that one person is willing to pay $1, another $0.90, and so on), but she does not know any specific individual's reservation price. (L03, LOS)
a. Calculate the marginal revenue of selling an additional cup of lemonade. (Start by figuring out the price Beth would charge if she produced only one cup of lemonade, and calculate the total revenue; then find the price Beth would charge if she sold two cups of lemonade; and so on.)
b. What is Beth's profit-maximizing price?
c. At that price, what are Beth's economic profit and total consumer surplus?
d. What price should Beth charge if she wants to maximize total economic surplus?
e. Now suppose Beth can tell the reservation price of each person. What price would she charge each person if she wanted to maximize profit? Compare her profit to the total surplus calculated in part d.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...