What level of output will maximize peters profits

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Peter Morgan sells pigeon pies from a pushcart in Central Park. Morgan is the only supplier of this delicacy in Central Park. His costs are zero due to the abundant supplies of raw materials available in the park.

(a) When he first started his business, the inverse demand curve for pigeon pies was p(y) = 100 - y, where the price is measured in cents and y measures the number of pies sold. Use black ink to plot this curve in the graph below. On the same graph, use red ink to plot the marginal revenue curve.

(b) What level of output will maximize Peter's profits? _________ What price will Peter charge per pie? _________

(c) After Peter had been in business for several months, he noticed that the demand curve had shifted to p(y) = 75 – (y/2). Use blue ink to plot this curve in the graph above. Plot the new marginal revenue curve on the same graph with black ink.

(d) What is his profit-maximizing output at this new price? __________ What is the new profit-maximizing price? __________

Reference no: EM13996831

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