You own a local fast-food restaurant and are introducing a new item to your menu -...

 

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You own a local fast-food restaurant and are introducing a new item to your menu - Shakes! You must decide on a pricing strategy for burgers, fries, and shakes. The market you serve contains equal numbers of 3 types of consumers: parents, Burger Buffs, and Fries Fiends. Each consumer will purchase at most 1 of each food type. Their valuations of the two goods are listed in the following table. Assume for this problem that the costs of production are zero. Consumer Valuations Consumer Types Parents Burger Buffs Fries Fiends Burgers $8 $6 $3 Fries $5 $3 $9 Shakes $6 $2 $4 a. What are the optimal (separate) prices for burgers, fries, and shakes? b. What is the optimal bundle price for a meal that includes a burger, an order of fries, and a milkshake? Did bundling increase your profits? Explain. You own a local fast-food restaurant and are introducing a new item to your menu - Shakes! You must decide on a pricing strategy for burgers, fries, and shakes. The market you serve contains equal numbers of 3 types of consumers: parents, Burger Buffs, and Fries Fiends. Each consumer will purchase at most 1 of each food type. Their valuations of the two goods are listed in the following table. Assume for this problem that the costs of production are zero. Consumer Valuations Consumer Types Parents Burger Buffs Fries Fiends Burgers $8 $6 $3 Fries $5 $3 $9 Shakes $6 $2 $4 a. What are the optimal (separate) prices for burgers, fries, and shakes? b. What is the optimal bundle price for a meal that includes a burger, an order of fries, and a milkshake? Did bundling increase your profits? Explain.

Answer rating: 100% (QA)

To determine the optimal prices for burgers fries and shakes and to calculate the optimal bundle price for a meal that includes one of each we can use ... View the full answer