A Careful Analysis of Demand for Bubbles in Strasburg, North

question 16

Multiple Choice

A careful analysis of demand for Bubbles in Strasburg, North Dakota, reveals a strange segmentation in the market.(Recall Bubbles is the beverage which produces an unexplained craving for Lawrence Welk's music.It is produced by the process Q =min{R/4, W}, where R is the number of pulverized Lawrence Welk records and W is gallons of North Dakota well water.P_R = $1, P_W = $4.) If demand for Bubbles by senior citizens is described by Q₀ = 500P^-3/2 while demand by those under 65 years old is Q_y = 50P^-4, how should Bubbles be priced to maximize profits?

• A)$12 for senior citizens and $32 for those younger
• B)$12.57 for all citizens of Strasburg
• C)$24 for senior citizens and $10.67 for those younger
• D)$8 for senior citizens and $21.33 for those younger
• E)$48 for senior citizens and $21.33 for those younger

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Definitions:

Resource

Assets, materials, or inputs used to produce goods and services, including natural resources, human resources, and capital.

AVC Curve

Represents the Average Variable Cost Curve, which shows the relationship between a firm's output and the variable costs per unit of output, typically declining and then rising.

AFC Curve

The Average Fixed Cost curve, which represents the fixed costs of production divided by the quantity of output produced, typically demonstrating a downward slope as output increases.

ATC Curve

In economics, the Average Total Cost curve is a graphical representation that shows the per-unit cost of production (total cost divided by the quantity produced) at different levels of output.