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(Solution) - Suppose you are a monopoly seller of potatoes facing a

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Suppose you are a monopoly seller of potatoes, facing a constant marginal cost of $10 per potato. Your customers are all identical, and they all have the following demand curve:



a. Suppose you announce a price per potato and allow consumers to buy as many potatoes as they like. What price do you charge? How much surplus do you earn per customer?
b. Suppose you package potatoes in bags of four and set the price per bag so that each consumer buys one bag. What price do you charge per bag and how much do you earn per customer?
c. Suppose you package potatoes in bags of four and set the price per bag so that each consumer buys two bags. What price do you charge per bag and how much do you earn per customer?
d. Suppose you package potatoes in bags of eight and set the price per bag so that each consumer buys one bag. What price do you charge per bag and how much do you earn per customer?
e. Which of the four strategies in parts (a) through (d) maximizes yourprofit?

 







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This question was answered on: Jul 11, 2017

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