Question

• Suppose Jake, Jobu, and Jonathan own a craft brew startup, J³ Brew, selling homemade beer. Their unit cost is constant at MC=$2.70 per bottle. The last time they raised the price 1%, it resulted in a 1.90% change in quantity demanded. They are currently charging $5 for a beer.
  • a. Should they adjust their price from $5? What is the optimal price?
  • b. Now suppose the price of spring water goes up, increasing their MC to $2.95. What is the new optimal price?

Answer 1