Question
Assume that each consumer in Will's town has the following yearly demand for wine: Q = 120 - 2P. The cost to produce wine is
Assume that each consumer in Will's town has the following yearly demand for wine: Q = 120 - 2P. The cost to produce wine is C = 150 + 10Q. Will wants to start a wine club with an annual membership fee and a per-bottle price. Local ordinances dictate that wine must be sold for at least $20 per bottle.
What will be the fee and per-bottle price that maximize profits for WW given this restriction?
Give the price per bottle.
How much consumer surplus does the typical consumer lose because of the ordinance that restricts the price of a bottle to at least $20?
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