Situation: You make cupcakes that you mail to customers across the country. The cupcakes are so unique that you have a great deal of pricing power. Your customers have identical demand curves for your cupcakes, and a representative customer's demand curve is shown below. (It's not necessary, but the demand curve equation is P-5-0.2Q or Q=25-5P.) Suppose your MC=$1/cupcake, whether you produce lots or just a few cookies. To keep things simple, suppose there are no fixed costs, so FC=0. Question 1, Part A) Acting as a monopolist, show the standard pricing analysis on the graph below that identifies your profit-mamximing price and quantity. Shade areas representing your profit and CS. P ($/cupcake) $2 MC=$1/cupcake 10 20 * Q (#cupcakes) Question 1, Part B) Suppose you offer a quantity discount of the form: the first 10 cookies at $3 each and any cookies over 10 are offered at a discounted price. What discount price will maximize your profit? Show this quantity discount arrangement on your graph and shade areas representing your profit and CS. P ($/cupcake) $2- MC=$1/cupcake 10 15 20 35 * Q. [#cupcakes)Question 1, Part C) Now you have another idea - to sell only packages of 20 cookies. What is your profit-maximing price for a 20-pack of cookies? What is the resulting profit? Shade areas below representing your price and profit answers. P ($/cupcake) $4 $2- MC=$1/cupcake * Q [#cupcakes) 10 15 35 5 20