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A monopoly is considering selling several units of hotdogs as a single package. A typical consumer's demand for the product is Qd=120 -.25P, and the marginal cost of production is $160.
Question A. Determine the optimal number of units to put in a package.
P=120 -Q/.25
480-4Q=160
320=4Q
Q=80 units
Question B. How much should the firm charge for this package?
.5x80x (Pmax-MC)
.5x80x (480-160) + 12,800
P=12800+12800
P= 25600
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