79.7k views
0 votes
Brittany provides manicures at the only salon in town. Her marginal cost is constant at $5 per client, her fixed cost is $25 per day, and she is able to do 8 manicures per day. On a given day, half of her clients are willing to pay $15 for a manicure; half are willing to pay only $10. If she charges all of her clients $10, then her maximum daily profit equals

$80
$15
$40
$55
$50

User Urbanhusky
by
8.2k points

1 Answer

7 votes

Answer:

$ 15

Step-by-step explanation:

Assuming Brittany cannot price differentiate each individual so she can either charge $15 or $10 to all. We will solve for both prices for information purposes.

Total daily revenue if she charges $15 :

15 *4 = $60 as only 4 people will buy manicures

Total daily revenue if she charges $10 :

10 * 8 = $80 all 8 people will purchase

Costs if she charges $15:

5 * 4 + 25 = $45

Costs if she charges $10:

5 * 8 + 25 = $65

So, profits

For $15 = 60 - 45 = $15

For $10 = 80 - 65 = $ 15

So both amounts result in same maximum profits.

Hope that helps.

User Levi Baguley
by
8.9k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.