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The following table represents Frank and Betty's maximum willingness to pay for a burger and fries from Hermie's Drive In. Suppose the marginal cost of making a hamburger is $0.50 and the marginal cost of an order of French fries is $0.25 (assume there are no fixed costs for either).
a) If Hermie's sets prices individually, what price would maximize profits for hamburgers? French Fries? How much profit would they earn from Frank and Betty using this pricing strategy?
B) If instead they bundle the hamburger and French fries into a combo meal, what price would maximize profits for the combo? How much profit would they earn from Frank and Betty using this pricing strategy?
Frank
Bety
Hamburger
$6.00
$3.00
French Fries
$.50
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