1. ['6 points) Prof? t Maximizo tion with no price discrimination You are running a [smallJ chain of gourmet burger joints with two locations lSan Antonio and Laredo} 'r'ou have been charging 510 for your burgerl meal [fries, burger and soft drink). Across both locations, you sell 2400 meals per week at this price When you raised the price to $13 for the burger meal, your sales across the two locations fell to 1800 meals per week. For your costs, you have xed costs of 53000 per week across the two locations. In addition, it costs you sir: dollars per burger in yariable costs (ingredients, labor etc_] A. What is your combined costfunction across the two locations B. Using the two prices aboye, estimate your combined demondfunctian across the two locations C. Using the combined demand function and cost function calculated above, calculate the prot maximizing price and quantity D. What are your (combinedl weekly profits across the two locotions? 2 ['6 points} Demand across the two locations After taking your managerial economics class, you realize that you can probably raise your prots by price discriminating by charging different prices in the two locations. You then breakdown sales across the two locations In Laredo: Ilou sold 960 burger meals per week at $10 and 600 meals at 513 In San Antonio: 'r'ou sold 144E! meals per week at Sill] and 12m meals at 513 A. Using the two prices oboye, estimate your demand function in Laredo. What would demand be at the optimal price from CH P B. Using the two prices oboye, estimate your demandfanction in San Antonio. What would demand be at the optimal price from 11? 3. ['6 points) Elastici'ties across die two locations A. Calculate the pointprice elasticity of demand at the optimal price for 01 (and quantity from Cl'l in Laredo B. Calculate the point price elasticity of demand at the optimal pri'ce for GI (and quantity from QEJ in San Antonio C. Assuming that your marginal oosts are 35, are you charging more, less, orexactly the optimal price in laredo Hint: Calculate markup on price {ierner's index} and compare it to El from ean'ier question I! D. Assuming that your marginal costs are 55, are you charging more, less, orexactly the optimal price in San Antonio Hint: Calculate markup on price fierner's index} and compare to :1 from eadierquestion i! E. Based on your analysis, describe how you should adjust prices in l_oredo and San Antonio 4. [6 points] Optimal price in Laredo You decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in [12 to calculate separate optimal prices in the two locations. For your costs in Laredo, you have xed costs of 51000 per week. In addition, it costs you Si): dollars get bugger in ya riable costs (ingredients, labor etc_} A. What is your cost function in Laredo? 5. Using the demondfunctian from Q2, calculate the profit maximizing price and quantity. is the new price higher or lower than the price if you do not price discriminate? is this consistent with ya ur answer from [23 C. What are your prots in laredo? 5. [6 points] Optimal price in San Antonio 'r'ou decide to charge different prices in the two locations. To do this, you decide to use the demand functions you estimated in [12 to calculate separate optimal prices in the two locations. For your costs in San Antonio, you have xed costs of $2000 per week. In addition, it costs you six dollars per burger in variable costs lingredients, labor etc}: A. What is your cost function in San Antonio? 5. Using the demondfunctian from Q2, calculate the profit maximizing price and quantity. is the new price higher or lower than the price if you do not price discriminate? is this consistent with ya ur answer from [23? C. What are your prots in San Antonio