Transcribed Image Text:The only gas station in a small town sells both regular and premium gasoline. The weekly demand functions for the two gasolines are
Qregular = 10,000 – 1,000Pregular +50Ppremium
Qpremium = 350+50 Pres
Pregular 100Ppremium
where quantities are measured in gallons and prices in dollars per gallon.
a. Are these products substitutes or complements?
O Neither complements nor substitutes, because the quantity of each type of gas demanded is unrelated to the price of the
other type of gas.
? Substitutes, because as the price of one type of gas increases, the quantity of the other type of gas demanded increases.
O Complements, because as the price of one type of gas increases, the quantity of the other type of gas demanded increases.
Substitutes, because as the price of one type of gas increases, the quantity of the other type of gas demanded decreases.
O Complements, because as the price of one type of gas increases, the quantity of the other type of gas demanded decreases.
b. If the price of regular gas is $3.90 per gallon, its marginal cost is $2.95, and the marginal cost of premium is $3.55, what is the profit-
maximizing price of premium gas?
Instructions: Round your answer to 2 decimal places.
$
5.31 x
Qregular = 10,000 – 1,000Pregular +50Ppremium
Qpremium = 350+50 Pres
Pregular 100Ppremium
where quantities are measured in gallons and prices in dollars per gallon.
a. Are these products substitutes or complements?
O Neither complements nor substitutes, because the quantity of each type of gas demanded is unrelated to the price of the
other type of gas.
? Substitutes, because as the price of one type of gas increases, the quantity of the other type of gas demanded increases.
O Complements, because as the price of one type of gas increases, the quantity of the other type of gas demanded increases.
Substitutes, because as the price of one type of gas increases, the quantity of the other type of gas demanded decreases.
O Complements, because as the price of one type of gas increases, the quantity of the other type of gas demanded decreases.
b. If the price of regular gas is $3.90 per gallon, its marginal cost is $2.95, and the marginal cost of premium is $3.55, what is the profit-
maximizing price of premium gas?
Instructions: Round your answer to 2 decimal places.
$
5.31 x
