Problem
You decide to start cookies. You know that the demand for sandwiches is given by P = 2.5-0.1Q and that MC.- AC = $0.50.
i. Assume you are operating as a pure monopolist. What price should you charge and how many cookies will you sell? What are your total profits?
ii. Assume you decide to offer a quantity discount: The first 10 cookies can be purchased for $1.50 each, but every cookie above 10 will be offered at a discounted price. What discounted price should you charge to maximize your profits from this deal, and how many additional cookies do you expect to sell? What are your total profits?