You sell Apples and Banana. You are considering selling them together and separately. You have three types of buyers, Banana lovers, fruit lovers and Apple lovers. The maximum price that buyers are willing to pay is given below
Maximum price each buyer is willing to pay
Apple
Banana
Banana lovers
$50
$40
Fruit Lovers
$75
$30
Apple Lovers
$100
$10
The cost function for Apple is given by the following cost function
C (Q) = 20 + 10Q
The cost function for Banana is given by the following cost function
C (Q) = 26.5+5Q
What is the profit maximizing price for Apple? Banana? What will be your company's profits?
Can you come up with a pricing that can do better than profits shown in part 1? When you use this pricing, what price should it charge to maximize profit and how much profit can you expect to earn?
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