Consider a city that has a number of hot dog stands operating throughout the downtown area. Suppose that each vendor has a marginal cost of $1.501.50 per hot dog sold and no fixed cost. Suppose that the maximum number of hot dogs that any one vendor can sell is 5050 per day. If the price of a hot dog is $2.002.00 , how many hot dogs does each vendor want to sell?

Question

Chung

Business

13 February, 03:40

Consider a city that has a number of hot dog stands operating throughout the downtown area. Suppose that each vendor has a marginal cost of $1.501.50 per hot dog sold and no fixed cost. Suppose that the maximum number of hot dogs that any one vendor can sell is 5050 per day. If the price of a hot dog is $2.002.00 , how many hot dogs does each vendor want to sell?

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Answers (1)

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Colin Brandt · Answer 1

Each vendor want to sell as many as possible.

Explanation:

As the marginal cost is $1.5 for each hot dog sold and It is not increasing. The maximum amount of hot dogs each vendor want to sell is infinite because the marginal cost of $1.50 is lower than the price of $2. They will always earn extra $0.5 when they sell one hot dog. So, the desire of infinite profit the every vendor want to sell as many as he could to maximize their profit. Normally vendor sell the product until marginal cost equals the revenue / price.