Use the following to answer questions: Table: Fast Food $$\begin{array} { l c c }
\hline & \text { Hamburger } & \text { French Fries } \
\hline \text { Chris } & \$ 4.00 & \$ 0.50 \
\mathrm { Jim } & 2.00 & 2.00 \
\hline
\end{array}$$
-(Table: Fast Food) This table represents Chris and Jim's maximum willingness to pay for certain fast-food items. The marginal cost of making a hamburger is $0.50 and the marginal cost of an order of French fries is $0.25. If this firm bundles hamburgers and French fries into a Combo Meal, what price should it charge for the meal to maximize profits across these two consumers?

Question

Use the following to answer questions: Table: Fast Food $$\begin{array} { l c c } 
\hline & \text { Hamburger } & \text { French Fries } \
\hline \text { Chris } & \$ 4.00 & \$ 0.50 \
\mathrm { Jim } & 2.00 & 2.00 \
\hline
\end{array}$$
-(Table: Fast Food) This table represents Chris and Jim's maximum willingness to pay for certain fast-food items. The marginal cost of making a hamburger is $0.50 and the marginal cost of an order of French fries is $0.25. If this firm bundles hamburgers and French fries into a Combo Meal, what price should it charge for the meal to maximize profits across these two consumers?

Quizplus · Accepted Answer

The profit-maximizing price is the sum of the marginal costs of the two items, which is $0.50 + $0.25 = $0.75. Since the firm is bundling the two items, it can charge a higher price than the sum of the marginal costs. However, it cannot charge a price higher than the maximum willingness to pay of either consumer. In this case, the maximum willingness to pay for the bundle is $4.00 + $0.50 = $4.50. Therefore, the profit-maximizing price for the Combo Meal is $4.50.

Use the Following to Answer Questions: Table: Fast Food -(Table: Fast Food) This Table Represents Chris and Jim's Maximum