1. The managers at Air Len are reviewing data on sandwich purchases on their flights to decide whether they should change the price at which they sell sandwiches to their passengers flying coach. On a typical flight the airline sells 72 sandwiches when they charge $3 per sandwich. When they set a price of $6, they sell 60 sandwiches per flight on average. If they set a price of $8, an average of 52 sandwiches are sold per flight. The airline managers were careful in reviewing data for comparable flights, and believe no factors other than the price explained the differences observed in quantities purchased.

a) What is the equation for this demand curve (Q as a function of p)?

b) Sandwiches are currently being sold on Air Len flights for $11 and the marginal cost is $3. Check whether this satisfies the optimal mark-up rule. Is $11 the profit-maximizing price? If so, why? If not, should the price be raised or lowered, and why?