# 1 A. A Restaurant Has Three Types Of Customers

1 a. A restaurant has three types of customers. A third of its customers, Type A, are willing to spend \$5 on an appetizer but only \$2 on a dessert. Another third, Type B, are willing to spend \$3.50 on an appetizer and \$3.50 on a dessert. The remaining third, type C, are willing to spend only \$2 on an appetizer but \$5 on a dessert. All three types are willing to spend \$10 on the main course. It costs the restaurant a constant \$2 to prepare an appetizer or a dessert, and \$7 to prepare the main course. Which is optimal for the restaurant, to offer appetizers and desserts a la carte (with separate prices on the menu), or to offer them as a complete meal, tied with the main course? 1 b. The manager of a national retailing outlet recently hired an economist to estimate the firm’s production function. Based on the economist’s report, the manager now knows that the firm’s marginal product of labor is MP = 60 – 2L, where L is the number of workers hired. The manager can sell the product in the market place for \$100 per unit, and the wage rate for labor is \$200. How many workers should the manager hire?