Problem Set #9

# Problem Set #9 - ECON 1001 Problem Set 9 Essay Background...

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ECON 1001 Problem Set 9 Essay

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Background story: You are the ONLY dry cleaning service in town. Your goal is to maximise profit. You clean a business suit for 8 customers per day. Cost of cleaning each suit is \$4.25 per suit. Customers’ reservation prices are as follows:
Customer Reservation Price (\$) A 6.0 B 5.8 C 5.6 D 5.4 E 5.2 F 5.0 G 4.8 H 4.6

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Question 1 If you charge a SINGLE PRICE to clean suits… What is the Profit-maximising price? How many suits would you clean? How much profit would you earn?
How do we find the profit-maximising price and quantity under a monopoly? What is the profit-maximising principle under a monopoly? MR = MC In general, this is profit-maximising principle for any types of firm.

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Therefore, we need to find the profit- maximising price and quantity for this monopoly. MR can be found by looking at customers’ reservation price schedule MC is given: \$4.25 per unit, constant.
Customer Rsrv Price (\$) TR A 6.0 6 B 5.8 11.6 C 5.6 16.8 D 5.4 21.6 E 5.2 26 F 5.0 30 G 4.8 33.6 H 4.6 36.8

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## This note was uploaded on 04/18/2011 for the course ECON 1001 taught by Professor S.c during the Spring '10 term at HKU.

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Problem Set #9 - ECON 1001 Problem Set 9 Essay Background...

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