1. (6 points) Profit Maximization with no price discrimination You are running a (small) chain of gourmet burger joints with two locations (San Antonio and Laredo) You have been charging $10 for your burger 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 fixed costs of $3000 per week across the two locations. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your combined cost function across the two locations B. Using the two prices obove, estimote your combined demand function across the two locations C. Using the combined demond function and cost function calculated above, calculate the profit moximizing price and quontity D. What are your (combined) weekly profits across the two locations? 2. (6 points) Demand across the two locations After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then breakdown sales across the two locations In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13 In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 A. Using the two prices obove, estimote your demand function in Laredo. What would demand be at the optimal price from Q1? B. Using the two prices obove, estimote your demand function in San Antonio. What would demand be at the optimal price from Q1? 3. (6 points) Elasticities across the two locations A. Calculate the point price elosticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elosticity of demand at the optimal price for Q1 (and quantity from Q2) in Sah Antonio C. Assuming that your marginal costs are \$6, are you charging more, less, or exactly the optimal price in Laredo Hint: Calculate markup on price (Lerner's index) and compare it to d1 from earlier question D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio Hint: Calculate markup on price (Lerner's index) and compare to a1 from earlier question E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio 1. (6 points) Profit Maximization with no price discrimination You are running a (small) chain of gourmet burger joints with two locations (San Antonio and Laredo) You have been charging $10 for your burger 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 fixed costs of $3000 per week across the two locations. In addition, it costs you six dollars per burger in variable costs (ingredients, labor etc.) A. What is your combined cost function across the two locations B. Using the two prices obove, estimote your combined demand function across the two locations C. Using the combined demond function and cost function calculated above, calculate the profit moximizing price and quontity D. What are your (combined) weekly profits across the two locations? 2. (6 points) Demand across the two locations After taking your managerial economics class, you realize that you can probably raise your profits by price discriminating by charging different prices in the two locations. You then breakdown sales across the two locations In Laredo: You sold 960 burger meals per week at $10 and 600 meals at $13 In San Antonio: You sold 1440 meals per week at $10 and 1200 meals at $13 A. Using the two prices obove, estimote your demand function in Laredo. What would demand be at the optimal price from Q1? B. Using the two prices obove, estimote your demand function in San Antonio. What would demand be at the optimal price from Q1? 3. (6 points) Elasticities across the two locations A. Calculate the point price elosticity of demand at the optimal price for Q1 (and quantity from Q2) in Laredo B. Calculate the point price elosticity of demand at the optimal price for Q1 (and quantity from Q2) in Sah Antonio C. Assuming that your marginal costs are \$6, are you charging more, less, or exactly the optimal price in Laredo Hint: Calculate markup on price (Lerner's index) and compare it to d1 from earlier question D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio Hint: Calculate markup on price (Lerner's index) and compare to a1 from earlier question E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio
