Answer:
The price per charged should be $2.5
Explanation:
Disutility cost per 0.25 mile is 25 cents. Therefore, the cost per mile is 4x25 cents = $1
The disutility for the entire 5 miles is $5. This implies that 1 stand can easily satisfy the
condition of the disutility not being more than $5.
Thus, the seller should operate 1 stand.
Now, the total transportation cost can be minimized if the stand is set up in the middle of
the beach. In that case, the sunbathers at the farthest two ends would face a cost of $2.5
(2.5 miles x $1)
This means that in order to satisfy the disutility condition, the total of the price charged,
and disutility incurred should be less than $5.
Therefore, $2.5 + Price < $5. This means that Price $2.5
In order to maximize the profits, he would charge the maximum possible price.
Thus, the price per charged should be $2.5
