Question
A supplier is selling tomatoes in two cities, St. Louis and Kansas City. It costs him $1 per lb of tomatoes delivered in each city.
A supplier is selling tomatoes in two cities, St. Louis and Kansas City. It costs him $1 per lb of tomatoes delivered in each city. Let p1 be the price of a lb of tomatoes in St. Louis and p2 be the price of a lb tomatoes in Kansas City. The price-response curves in each city:
Antalya: d1(p1) = 500 - 100p1
Istanbul: d2(p2) = 1,200 - 200p2
Assuming the supplier can charge any price he likes, what prices should be charged for a lb of tomatoes in St. Louis and Kansas City to maximize total contribution? What are the corresponding demands, revenues, and total contributions in each city? What is the total demand, total revenue, and total contribution over the two cities?
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