3. As the new owner of Legend's Bar and Grill you must decide on a cover charge and drink prices. Suppose there are two types of drinkers. The partiers have demand: Q1 = 6 – P, where Q1 is drinks per night and P is price per drink. The social drinkers have demand: Q2 = 3 – 0.5P. You cannot distinguish between the two types so you charge the same price to everyone. Because the University is providing you unlimited alcohol at a fixed price, assume your marginal cost of a drink is zero, but you must pay the University a fixed cost (which is low enough that it can be ignored for this problem). What cover charge (rounded to the nearest dollar) and per drink cost would maximize nightly profits? (a) Cover = $10; Per Drink Price = $1.50 (b) Cover $5; Per Drink Price = $1.50 (c) Cover = $5; Per Drink Price = $3.00 (d) Cover = $10; Per Drink Price = $3.00

3. As the new owner of Legend's Bar and Grill you must decide on a cover charge and drink prices. Suppose there are two types of drinkers. The partiers have demand: Q1 = 6 – P, where Q1 is drinks per night and P is price per drink. The social drinkers have demand: Q2 = 3 – 0.5P. You cannot distinguish between the two types so you charge the same price to everyone. Because the University is providing you unlimited alcohol at a fixed price, assume your marginal cost of a drink is zero, but you must pay the University a fixed cost (which is low enough that it can be ignored for this problem). What cover charge (rounded to the nearest dollar) and per drink cost would maximize nightly profits? (a) Cover = $10; Per Drink Price = $1.50 (b) Cover $5; Per Drink Price = $1.50 (c) Cover = $5; Per Drink Price = $3.00 (d) Cover = $10; Per Drink Price = $3.00

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter13: Monopoly And Antitrust

Section: Chapter Questions

Problem 13P

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