Question

The managers of an upscale seafood restaurant have determined that adult and senior diners have different demands. The adult demand function for dinners is:

Q^d = 200 - P

and the senior demand function for dinners is:

Q^d = 180 - 2P

The marginal cost of a dinner is constant at $25.
Suppose the managers do not press discriminate and there is no fixed cost.

The price they will charge per dinner is $___

Suppose the managers do price discriminate.

The price they will charge adults is $___ per dinner, in the price they will charge seniors is $___ per hour.

Suppose there is no fixed cost.

The price they will charge adults is $___, in the quantity of dinners they will sell to seniors is ___

Suppose there is no fixed cost.

The restaurants economic profit if the managers charge one price is $___

The restaurants economic profit if the managers engage in price discrimination is $___

Answer 1

The price the restaurant will charge per dinner is $20 if they do not engage in price discrimination. If they do price discriminate, the price for adults will be $35 and for seniors will be $30. If there is no fixed cost, the restaurant will charge adults $20 and sell 70 dinners to seniors. The restaurant's economic profit is $3750 without price discrimination, and $4550 with price discrimination.

Step-by-step explanation:

The price the restaurant will charge per dinner is $20 if they do not engage in price discrimination. This is determined by setting the marginal cost equal to the demand function for adults: 25 = 200 - P, and solving for P.

If the restaurant engages in price discrimination, they will charge adults $35 per dinner and seniors $30 per dinner. This is determined by setting the marginal cost equal to the respective demand functions: 25 = 200 - P for adults, and 25 = 180 - 2P for seniors, and solving for P.

If there is no fixed cost, the price charged to adults will still be $20, and the quantity of dinners sold to seniors will be 70. This is determined by setting the marginal cost equal to the respective demand functions: 25 = 200 - P for adults, and 25 = 180 - 2P for seniors, and solving for P and Qd.

The restaurant's economic profit if they charge one price is $3750. This is determined by calculating the difference between total revenue and total cost, using the one-price model.

The restaurant's economic profit if they engage in price discrimination is $4550. This is determined by calculating the difference between total revenue and total cost, using the price discrimination model.