Question

Suppose there are 100 consumers who are willing to pay of $4 for the first hamburger, $1.50 for the second, and $0.50 for the third; nobody wants to eat more than three. Assume each hamburger costs $1 to produce, and the fixed cost of operating the restaurant is $200. What is the pricing schedule that maximizes the restaurant's profit? What is the overall profit? Now suppose there are two types of consumers which you cannot easily distinguish. 50 customers are willing to pay $4 for the first hamburger, $1.50 for the second, and $0.50 for the third, but the remaining 50 are willing to pay of $4 for the first hamburger, $2.00 for the second, and $1.30 for the third. Which pricing schedule maximizes the restaurant's profit (you can only use one pricing schedule)? What is the overall profit?

Answer 1

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