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In your group project for Chapter 3 you encountered some data for the daily demand for pizza at an average Pizza Hut. (The data are
In your group project for Chapter 3 you encountered some data for the daily demand for pizza at an average Pizza Hut. (The data are reproduced in the table to the right.) Your manager at Yum, Inc has returned to these data with one last assignment for you. Pizza Hut estimates that on the average a store has fixed costs of $100 per day. The fixed costs include interest payments on borrowed funds used to fund construction of the store and rental payments for their land. Pizza Hut also estimates that the marginal cost of a pizza is $8. Suppose Pizza Hut is a monopoly. (Later you will see that Pizza Hut is probably better thought of as a monopolistic competitive firm. But you will also see that the answers to the questions you next see are the same [at least in short run] regardless of whether Pizza Hut is a monopoly or a monopolistic competitive firm.) Your manager wants to know what are the profit-maximizing price for a pizza and the profit-maximizing quantity. Your manager also wants to know what will be the profit at this price and quantity. To make your analysis easier, your manager will allow you
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