Answer to Question #71851 in Microeconomics for Chad Holiday

Question #71851
Imagine you've started a new pizza restaurant. It costs you about $5 to produce a pizza. Last week you sold 500 pizzas for $10 each. This week you raised your price and sold 150 pizzas for $16 each. What price should you be charging? (round to the nearest penny)
1
Expert's answer
2017-12-16T04:43:07-0500
If it costs you about $5 to produce a pizza, last week you sold 500 pizzas for $10 each and this week you raised your price and sold 150 pizzas for $16 each, then demand for pizza is elastic, so you should decrease price to increase total revenue and you should charge price lower than $10 per pizza. But to find exact profit-maximizing price we should know information about marginal cost and revenue.

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