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Let us return to the situation with two lemonade stands, but this time their locations are fixed. The first stand is located at the middle of the beach, while the second stand is located all the way at the far (right) end of the beach. How would the two owners set their prices to maximize their profits? Assume that the beach is 1 mile in length, there are 120 consumers uniformly distributed along the beach, the consumers have a travel cost of $3/mile, and the lemonades are costless to produce. How many lemonades are sold by each stand? What are the realized profits for each owner?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M939774

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