You are in charge of pricing for a chain restaurant in Brazil. You have the data in
Question:
You are in charge of pricing for a chain restaurant in Brazil. You have the data in the following table on the marginal costs and marginal revenues for different quantities of meals that can be served in a three-hour time block for restaurants of differing capacities (sizes). The costs and revenues include the marginal capacity cost (MCCAP);
the marginal operating cost (MCOP); the marginal revenue at peak dining hours, 6 p.m.
to 9 p.m. for dinner (MRPEAK); and the marginal revenue at off-peak dining hours, 11 a.m. to 2 p.m. for lunch (MROFF ). All costs and revenues are in U.S. dollars.
The price elasticity of demand is 3.25 during the peak hours and 5.0 during the off-peak hours. To maximize the restaurant’s profit,
a. What restaurant capacity (quantity of meals) should you select?
b. What should be the quantity and price for the meals served during the peak dinner hours?
c. What should be the quantity and price for the meals served during the off-peak lunch hours?
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