A firm has estimated that the demand for its product comes from two types of cus

Question

A firm has estimated that the demand for its product comes from two types of customers, type I and type II. Each type I customer (there are 45 of them) has a demand curve given by Q = 20 - P, while each type II customer (there are 50 of them) has a demand curve given by Q = 15 - P. The firm's marginal cost is constant and equal to $5. Suppose the firm wants to use a two-part pricing strategy (T; P), and it has decided to set P = $5 (we know this need not be optimal, but this is what the firm has decided to set). With P = $5, the profit-maximizing T is Answer T = $50 T = $112.5 T = $25 None of the Above A firm has estimated that the demand for its product comes from two types of customers, type I and type II. Each type I customer (there are 45 of them) has a demand curve given by Q = 20 - P, while each type II customer (there are 50 of them) has a demand curve given by Q = 15 - P. The firm's marginal cost is constant and equal to $5. Suppose the firm wants to use a two-part pricing strategy (T; P), and it has decided to set P = $5 (we know this need not be optimal, but this is what the firm has decided to set). With P = $5, the profit-maximizing T is T = $50 T = $112.5 T = $25 None of the Above T = $50 T = $112.5 T = $25 None of the Above

Explanation / Answer

T = $25

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