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Suppose that the store has pricing power in its small town. For the sake of simplicity, assume that the store faces a perfectly inelastic demand
Suppose that the store has pricing power in its small town. For the sake of simplicity, assume that the store faces a perfectly inelastic demand (so that the quantity sold is not affected by changes in price). The store owner decides to pass the extra cost of the paper straw ($.02 per milkshake) on to the consumer. How much profit does the store receive? Remember: The price of a milkshake with a plastic straw is $2.00 and the store sells 1,000 milkshakes per day a) $1000 b) $1020 ) $980 d) $0 e) $2000
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