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U.S. Airways experienced huge losses for several years in the 1990s, yet it continued to operate its fleets. Why didn't U.S. Airways shut down its operations to avoid the losses? You are the manager of a gas station in a small town, and your goal is to maximize profits. Based on your experience, the elasticity of demand of Texans for a car wash is -2, while that of non-Texans is -1.5. Your marginal cost is $6.

a. Are the conditions necessary for price discrimination to be an effective means of enhancing profits being met? Explain.

b. What is the profit-maximizing price to charge a Texan for a car wash?

c. What is the profit-maximizing price to charge a Californian for a car wash?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9165908

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