Sparkling Water Co. has determined that the price elasticity of demand for a cas

Question

Sparkling Water Co. has determined that the price elasticity of demand for a case of its purified water by Michigan residents is –3.0, while the price elasticity of demand by Florida residents is –2.5. Assume that the marginal cost is constant at $8. What price should Sparking Water Co. charge Michigan and Florida customers? a. Customers in Michigan and Florida should be charged $16 a case. b. Michigan customers should be charged $12 a case and Florida customers charged $13.33 a case. c. Customers in Michigan and Florida should be charged $13.33 a case. d. Michigan customers should be charged $10 a case and Florida customers charged $14.00 a case. Sparkling Water Co. has determined that the price elasticity of demand for a case of its purified water by Michigan residents is –3.0, while the price elasticity of demand by Florida residents is –2.5. Assume that the marginal cost is constant at $8. What price should Sparking Water Co. charge Michigan and Florida customers? a. Customers in Michigan and Florida should be charged $16 a case. b. Michigan customers should be charged $12 a case and Florida customers charged $13.33 a case. c. Customers in Michigan and Florida should be charged $13.33 a case. d. Michigan customers should be charged $10 a case and Florida customers charged $14.00 a case.

Explanation / Answer

b

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