Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You run a cookie shop that sells such good cookies that there are no close competitors (i.e., you are a monopoly). You primarily sell your

You run a cookie shop that sells such good cookies that there are no close competitors (i.e., you are a monopoly). You primarily sell your cookies to multiple large institutions like Universities, large commercial distibutors, and sports stadiums. Because you know your customers well, you know each of their individual demand curves and can price discriminate perfectly.

Suppose one customer has the following (inverse) demand for cookies:

p = 350 3Q

The cost of cookies is C(Q) = 9Q. For simplicity, we are assuming no fixed cost. This means the marginal cost and average cost of cookies are the same AC = MC = 9

How much profit can you make from this customer when perfectly price discriminating?

Round to the nearest whole number.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Why Nations Fail The Origins Of Power, Prosperity, And Poverty

Authors: Daron Acemoglu, James Robinson

1st Edition

0307719227, 9780307719225

More Books

Students also viewed these Economics questions