A restaurant faces very high demand for its signature mousse desserts in the evening but is less
Question:
A restaurant faces very high demand for its signature mousse desserts in the evening but is less busy during the day. Its manager estimates that inverse demand functions are pe = 20 − Qe in the evening and pd = 11 − Qd during the day, where e and d denote evening and daytime. The marginal cost of producing its dessert, MC1, is $3. Any morning, the restaurant can bring in additional tables and convert its storage space to seating to increase capacity for that day. Creating enough extra capacity to provide one more dessert in the evening or the day costs $5, which is the restaurant’s marginal capacity cost, MC2.
a. Create a spreadsheet with the column headings Qe, pe, MRe, Qd, pd, MRd, MC1, MC2, and MCT = MC1 + MC2.
b. Determine the optimal prices for the dessert that the restaurant should charge during the evening hours and during the day, the associated quantities sold, and the total daily profit.
Step by Step Answer:
Managerial Economics and Strategy
ISBN: 978-0134167879
2nd edition
Authors: Jeffrey M. Perloff, James A. Brander