Draw a graph with revenue and costs curves to show profit

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Reference no: EM131133182

Willingness to Pay for a Dunkin Donuts Franchise. You operate a Dunkin Donuts shop under a franchise agreement. You pay a royalty of 6 percent of your sales revenue to the parent company. Your profit-maximizing quantity is 10,000 donuts per year, and at this quantity your price is $1.00 and your average cost per donut (including all the opportunity cost of production but not the 6 percent royalty) is $0.44. (Related to Application 2 on page 565.)

a. Draw a graph with revenue and costs curves to show your profit-maximizing choice.

b. What is the maximum amount you are willing to pay per year for the franchise?

Reference no: EM131133182

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