Question
An unemployed outdoorsman in Louisiana is considering selling fresh water to hurricane victims in Texas. Traveling to Texas is expected to cost $2,000 and water
An unemployed outdoorsman in Louisiana is considering selling fresh water to hurricane victims in Texas. Traveling to Texas is expected to cost $2,000 and water is expected to cost $3 per gallon to buy in Texas. Victims in Texas would be willing to pay $20 per gallon for up to 500 gallons.
a. Determine the outdoorsmen's total cost function.
b. Determine whether the outdoorsmen with sell the water in Texas. And if so, determine output and profit.
c. What would happen if the Texas attorney general's office considers $20 per gallon price gouging, and so the government imposed a cap of $4 per gallon? Determine supply and profit.
d. How would your answer to questions a, b, c change if the outdoorsman has already traveled to Texas but not yet bought the water?
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