1. The price elasticity of demand for a rental home in Luxury Resorts in the summer is 1.40 and is 2.60 in the spring. If Luxury Resorts faces a constant marginal cost of $600 per home rental, what is the profit-maximizing peak-load price to charge in the summer?

a. $975 b. $2,100 c. $2,750 d. $1,250

2.

Price and cost [dollars per meal) 45 .. l : . 4o..... ..... 35 30 25 2O 15 10 5 ~MR DININER DLUNCH' L'UN'HW\" f" " DINNER O 200 400 600 800 1,000 Quantity (meals) The figure above shows the demand for meals at lunch and dinner for a proposed new restaurant. Suppose the marginal cost of a meal (both lunch and dinner) is constant at $10 per meal and marginal cost of providing the capacity is constant at $5 per meal. Once the managers have determined the profitmaximizing capacity, at dinner they will serve meals and set a price of per meal. 0 800; $25 (3 200;$2o O 600: $30 0 200; $35