Estimate the profit-maximizing price for ice cream cones

Reference no: EM13903494

The Economists' Approach to Pricing: Kimio Nakimura owns an ice cream stand that she operates during the summer months in Jackson Hole, Wyoming. Her store caters primarily to tourists passing through town on their way to Yellowstone National Park.

Kimio is unsure of how she should price her ice cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $1.79 and 860 cones were sold. During the second week, she priced the cones at $1.39 and 1,340 cones were sold. The variable cost of a cone is $0.41 and consists solely of the costs of the ice cream and of the cone itself. The fixed expenses of the ice cream stand are $425 per week.

Required:

1. Did Kimio make more money selling the cones for $1.79 or for $1.39?

2. Estimate the price elasticity of demand for the ice cream cones.

3. Estimate the profit-maximizing price for ice cream cones.

Reference no: EM13903494

Questions Cloud

Marginal cost curve of a typical firm : Widgets are provided by a competitive constant-cost industry where each firm has fixed costs of $30. The following chart shows the industry-wide demand curve and the marginal cost curve of a typical firm:

Compute the linear trend equation for the deseasonalize data : Deseasonalize the time series. Compute the linear trend equation for the deseasonalize data and forecast sales for the first quarter of year 4. Be sure to reseasonalize your forecast

Describe the collapse of the roman empire : Describe the Collapse of the Roman Empire

What assumption does the absorption costing approach make : When the absorption costing approach to cost-plus pricing is used, what is the markup supposed to cover? What assumption does the absorption costing approach make about how consumers react to prices?

Estimate the profit-maximizing price for ice cream cones : Did Kimio make more money selling the cones for $1.79 or for $1.39? Estimate the price elasticity of demand for the ice cream cones. Estimate the profit-maximizing price for ice cream cones.

Find the new equilibrium price and quantity : Suppose quantity demanded for the good rises by 10 units at every possible price while at the same time quantity supplied falls by 5 units at every possible price (with the exception that quantity supplied cannot drop below zero units at any price..

Major cause of higher doctor bills : How much does it cost to practice medicine? Are malpractice insurance premiums a major cause of higher doctor bills? Is medical care sold like other goods and services?

Compute the target cost of one battery : Eastern Auto Supply, Inc., produces and distributes auto supplies. The company is anxious to enter the rapidly growing market for long-life batteries that is based on lithium technology. Compute the target cost of one battery.

Find the velocity of the wave : The distance between two consecutive nodes of a standing wave is 20.4 cm. The hand generating the pulses moves up and down through a complete cycle 3.61 times every 5.03 s. Find the velocity of the wave. Answer in units of m/s.

User Account

All Pages