Question: Need help with this problem, don't understand set up confused 2. (Lemonade stand) Suppose you open a lemonade stand on the side of the street.

Need help with this problem, don't understand set up confused

Need help with this problem, don't understand set up confused 2. (Lemonade

2. (Lemonade stand) Suppose you open a lemonade stand on the side of the street. Potential buyers drive by according to a Poisson process {Nth>0 with rate 1. The ith buyer is willing to pay up to Xi for a lemonade, Where {Xk }k>1 are i.i.d. uniform [0, 1] random variables, but you are only allowed to display one price and if the buyer does not like it they will just drive past. Suppose it costs you c = 0.2 to produce one lemonade. (a) Suppose you can run the lemonade stand all day, that is, for the interval [0,24]. What price p should you charge to maximize prot? (b) Suppose you only have enough lemon juice to sell 5 lemonades in a day. What price p should you charge to maximize prot

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