Larry, Curly, and Moe run the only saloon in town. • Larry wants to sell as...
Larry, Curly, and Moe run the only saloon in town.
| • | Larry wants to sell as many drinks as possible without losing money. |
| • | Curly wants the saloon to bring in as much revenue as possible. |
| • | Moe wants to make the largest possible profit. |
Use the black point (plus symbol) to show the price and quantity combination favored by Larry. Then use the grey point (star symbol) to show the price and quantity combination favored by Curly. Finally use the purple point (diamond symbol) to show the price and quantity combination favored by Moe.
Homework Answers
- Larry wants to to sell as many
drinks as possible without lossing money. It is only possible if
Larry sets quantity where price (demand) equals average cost. This
occurs at points
QL and
PL. - Curly wants the saloon to bring in as much as revenue as possible by lowering marginal revenue to zero. This occurs at point QC and PL.
- Moe wants to make the largest possible profit by equating marginal revenue with marginal cost. This this occurs at pint QM and PM.
QL and
PL.All the above facts are shown in the following diagram:
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Larry, Curly, and Moe run the only saloon in town.
•
Larry wants to sell as...
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