1. Suppose that, during the day, the station owners demand is given by PD = 2.06 -...
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1. Suppose that, during the day, the station owner’s demand is given by PD = 2.06 - .00025QD. The marginal cost of selling gasoline is $1.31 per gallon. At his current $1.69 price, he sells 1,500 gallons per week. Is this price-output combination optimal? Explain.
2. The station owner sells an equal number of gallons at night, setting PN = $2.59. Suppose elasticity of demand is EP = -3. According to the optimal markup rule, is this price profit maximizing?
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1 The price is maximized when MC MR TR PQ 206000025QQ MR dTRdQ MT 206 00005Q MC 131 Equat...View the full answer
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