Suppose two types of consumers buy suits. Consumers of type A will pay $100 for

Question

Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm can identify each consumer type and can price discriminate, what is the optimal price for a pair of pants?

A

Charge both types $150.

B

Charge both types $75.

C

Charge type A consumers $50, and type B consumers $75.

D

Charge type A consumers $50, and type B consumers $50.

A

Charge both types $150.

B

Charge both types $75.

C

Charge type A consumers $50, and type B consumers $75.

D

Charge type A consumers $50, and type B consumers $50.

Explanation / Answer

Ans. When the firm is able to discriminate among the consumers then it will Charge type A consumers $50, and type B consumers $75 because firm is using price discrimination policy in which it charges different consumer different prices based on their ability to pay or willingness to pay.

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