A Careful Analysis of Demand for Bubbles in Strasburg, North

question 23

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/5, 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^-5, how should Bubbles be priced to maximize profits?

• A)$13 for all citizens of Strasburg
• B)$9 for senior citizens and $30 for those younger
• C)$27 for senior citizens and $11.25 for those younger
• D)$13.50 for senior citizens and $45 for those younger
• E)$60 for senior citizens and $25 for those younger

---

Definitions:

Regressive

Refers to systems, especially tax systems, where the rate decreases as the amount subject to taxation increases, placing more of a burden on low-income earners.

OECD

The Organisation for Economic Co-operation and Development, an international organization that works to build better policies for better lives, promoting policies to improve the economic and social well-being of people around the world.

Progressive Tax System

A tax structure where the tax rate increases as the taxable amount or income increases, placing a larger financial burden on higher-income earners.

Tax System

The structured collection of laws and regulations that govern how taxes are collected, managed, and utilized by a government.