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Pole Position, a retailer at Destiny Mall, has a variable cost of $ 2 per lap driven. It has identified two segments of customers: Hard
Pole Position, a retailer at Destiny Mall, has a variable cost of $ per lap driven. It has identified
two segments of customers: HardCore drivers and JustForFun drivers. For simplicity,
throughout this problem, assume there is exactly one customer in each of the two segments. Market
research has revealed how each segment values the experience, depending on how many laps are
raced:
Suppose Pole Position charges a price of $ per lap.
a How many laps would a HardCore customer purchase? Hint: for each possible # of
Laps, calculate the total price paid and the net benefit, ie Total Benefit less Total Price.
The customer will buy the number of laps that yields the highest net benefit.
b How much profit would Pole Position earn from these sales?
c How many laps would a JustForFun customer purchase?
d How much profit would Pole Position earn from these sales?
Suppose Pole Position only had one HardCore driver and no JustForFun drivers.
a What price per lap would maximize its profit?
b At this price, how many laps would a HardCore driver purchase?
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