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Question - Suppose a bar in a remote mining town is the only bar within one hundred kilometres and so is a monopoly. The bar has a short run cost function C(Q) = 80 + 4Q and the market demand for its drinks is Q = 400 - 40p where Q is the number of drinks and p is the price of a drink.
A. Find the bar's short run profit.
B. The bar comes up with an idea to have a cover charge of $A per person to enter the bar. There are twenty identical customers that make up the market demand Q = 400 - 40p. Find the amount of the cover charge A per person and the price per drink p the bar should set in order to maximize profits.
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