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Packages of bran muffins: Optimal package size and price

You are the manager of a bakery that produces and packages gourmet bran muffins, and you currently sell bran muffins in packages of three. You want to examine price and output strategy. A typical consumer's inverse demand for your bran muffins is now P = 3 - 0.5Q and your cost of producing bran muffins is C(Q) = Q. Determine the optimal number of bran muffins to sell in a single package and the optimal price of that package.

Solution Preview

The optimal quantity and price are where Marginal Revenue (MR) = Marginal Cost (MC)

To find MR, first find Total Revenue ...

Solution Summary

This solution shows how to calculate the optimum number of bran muffins to put into a package and the optimum price to charge. All the calculations are fully shown.