A typical customer who buys from a firm has a demand given by P = 90 - 3 Q. The

Question

A typical customer who buys from a firm has a demand given by P = 90 - 3 Q. The firm has a constant marginal cost MC = $18 and no fixed cost. It currently uses a uniform pricing strategy (i.e., it charges a single price for all the units it sells), but it is contemplating to switch to the following block pricing strategy: Buy the first 5 units at a price of $75 per unit, and any subsequent unit at a price of $54 per unit. If the firm uses this pricing strategy, then

a, Each customer will buy 17 units

b Each customer will buy 5 units

c Each customer will buy 7 units

d Each customer will buy 12 units

Explanation / Answer

b Each customer will buy 5 units

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