Suppose a bakery sells cookies in Orlando that are so special and delicious that it becomes a
Question:
Suppose a bakery sells cookies in Orlando that are so special and delicious that it becomes a monopoly in the local market. The market demand for Orlando as a whole for the bakery’s cookies is:
Q = 300 − 62.5p
or written in inverse form:
p = 4.8 − 0.016Q
where p is the price per cookie and Q is the number of cookies sold per day.
The bakery discovers that it has two groups of customers: senior citizens and non-senior citizens.* The inverse demand for each group:
p = 5 − 0.02QNon-Senior Citizens
p = 4 − 0.08QSeniors
Assume the cost of producing each cookie is $1 (i.e., marginal cost and average cost is $1).
*Note that the market demand is just the sum of the demands of the two groups.
Assuming the bakery is permitted to charge different prices to seniors and non-seniors, what price will it sell to non-seniors? Provide the answer to the nearest cent (0.01).
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta