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##### Consolidated Salt Company sells table salt to both retail grocery chains

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solution

Question

10. (10 points) Consolidated Salt Company sells table salt to both retail grocery chains and commercial users (e.g., bakeries, snack food makers, etc.). The demand function for each of these markets is;Retail grocery chains: P1 = 180 ? 8Q1;Commercial users: P2 = 100 ? 4Q2;where P1 and P2 are the prices charged and Q1 and Q2 are the quantities sold in the respective markets. Consolidated's total cost function (which includes a "normal" return to the owners) for salt is;TC = 20(Q1 + Q2);(a) Determine Consolidated's total profit function. (4 Points);(b) Assuming that Consolidated is effectively able to charge different prices in the two markets, what are the profit-maximizing price and output levels for the product in the two markets? What is Consolidated's total profit under this condition? (Total of 3 Points);(c) Assuming that Consolidated is required to charge the same price in each market, what are the profit-maximizing price and output levels? What is Consolidated's total profit under this condition? (Total of 3 Points)

Paper#22930 | Written in 18-Jul-2015

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