solutionproblemset8

# solutionproblemset8 - Econ 11 Homework 8 Answer Key 1 Maria...

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Econ 11 Homework 8 Answer Key 1) Maria sells small, individual-sized pizzas from a small cart at a shopping mall in Toledo. She uses a unique sauce that attracts a loyal following of customers. The demand for her pizzas is Q=1650-250P, and her costs are C=0.72Q+0.0035Q 2 . Q is the number of pizzas sold per week, TC is Maria’s weekly total cost, and P is the price of a pizza. a) What price and output will Maria choose to maximize profits? b) Maria returns to college and asks her cousin Victor to manage her pizza business. Victor faces the same demand and cost conditions as Maria, but he decides to maximize revenue. What price and output should he choose? Answer a) P=6.6-0.004q, TR=6.6q-0.004q 2 , MR=6.6-0.008q. MC=0.72+0.007q. MR=MC implies that q=392 & P=5.032. b) Victor sets MR=0. Then q=825 and P=3.30. 2) Joshua owns a small boat and catches lobster off the coast of Maine. His weekly cost function is TC=196+0.32q+0.0049q 2 . He sells his lobsters to the local wholesaler at the market price P (in dollars).

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