Coastal Soda Sales has been granted exclusive market
rights to the upcoming Beaufort Seafood Festival.
This means that during the festival Coastal will have a
monopoly, and it is anxious to take advantage of this
position in its pricing strategy. The daily demand function
is
p 5 2 2 0.0004x
and the daily total cost function is
C1x2 5 800 1 0.2x 1 0.0001x2
where x is the number of units.
(a) Determine Coastal’s total revenue and profit
functions.
(b) What profit-maximizing price per soda should
Coastal charge, how many sodas per day would it
expect to sell at this price, and what would be the
daily profits?
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(c) If the festival organizers wanted to set an economically
efficient price of $1.25 per soda, how would
this change the results from part (b)? Would
Coastal be willing to provide sodas for the festival
at this regulated price? Why or why not?