The American Baker’s Association reports that annual sales of bakery goods last year rose 15%, driven by a 50% increase in the demand for bran muffins. Most of the increase was attributed to a report that diets rich in bran help prevent certain types of cancer. You are the manager of a bakery that produces and packages gourmet bran muffins, and you currently sell bran muffins in packages of three. However, as a result of a new report a typical consumer’s inverse demand for your bran muffins is now
P = 3 - .5Q. If your cost of producing bran muffins is C (Q) = Q and your MC = 1,
Determine the optimal number of bran muffins to sell in a single package.
Draw the demand and cost curves.
What are the two parts of the price?
What is the optimal package price?