Suppose there are three types of customers who frequent Louisiana Fried Chicken

Question

Suppose there are three types of customers who frequent Louisiana Fried Chicken (LFC), a fast food chain that sells chicken and biscuits. (For simplicity, assume an equal number of each type of customer) These customers have the following valuations (“reservation pricesâ€) for chicken and biscuits: Consumer Chicken Biscuits 1 $12 $1 2 $10 $3 3 $9 $4 Suppose the fully allocated cost of making an order of chicken is $6 and the fully allocated cost of making an order of biscuits is $2.50. If LFC sells chicken and biscuits as a meal deal, what price would be set for the meal deal which includes both an order of chicken and an order of biscuits? Please explain your answer Answer a. $13 b. $14 c. $15 d. $16 Suppose there are three types of customers who frequent Louisiana Fried Chicken (LFC), a fast food chain that sells chicken and biscuits. (For simplicity, assume an equal number of each type of customer) These customers have the following valuations (“reservation pricesâ€) for chicken and biscuits: Consumer Chicken Biscuits 1 $12 $1 2 $10 $3 3 $9 $4 Suppose the fully allocated cost of making an order of chicken is $6 and the fully allocated cost of making an order of biscuits is $2.50. If LFC sells chicken and biscuits as a meal deal, what price would be set for the meal deal which includes both an order of chicken and an order of biscuits? Please explain your answer $13 $14 $15 $16 a. $13 b. $14 c. $15 d. $16

Explanation / Answer

Answer is D i.e $16

This is so because this will give them maximum profit at a reasonable price

This will happen at a scattering of price like:

$12 for chicken($6 profit)

$4 fo biscuits($1.50 profit)

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