The American Baker\' s Association reports that annual sales of bakery goods las
ID: 1203947 • Letter: T
Question
The American Baker' s Association reports that annual sales of bakery goods last year rose 15%, driven by a 50% increase in the demand for bran muffins. Most of the increase was attributed to a report that diets rich in bran help prevent certain types of cancer. You are the manager of a bakery that produces and packages gourmet bran muffins, and you currently sell bran muffins in packages of three. However, as a result of a new report a typical consumer's inverse demand for your bran muffins is now P = 3 - 5Q. If your cost of producing bran muffins is C (Q) = Q and your MC = 1, determine the optimal number of bran muffins to sell in a single package Draw the demand and cost curves. What are the two parts of the price? In addition, what is the optimal package price?Explanation / Answer
P = 3- 0.5Q
TR: 3Q - 0.5Q2
MR = 3 - Q = MC
3-Q = 1; Q = 2
P = 3 - 1 = 2
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