Monterey's Restaurant is currently the only restaurant in town that sells Mexican food. Monterey's advisors estimate that the demand for Mexican food in the area is given by:
Q = 10 -0.5P
Where P is the average price of a meal and Q is the quantity of meals. The restaurant' s costs are estimated with the following equation:
TC = 150 + 5Q + 0.5Q2
Given this information, how much output should Monterey's produce to maximize profits?
How much should it charge for each meal? Is Monterey's restaurant making a profit? If yes, how much?
Without doing any calculations, if you were Monterey's advisors, what would you recommend they do to improve their profits ?
Suppose that price discrimination was an option available to Monterey's? What would Monterey's need to do to be able to practice second or third degree price discrimination?