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Discrimination scheme is more profitable than a single

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For each of the following questions, explain you answer and show your work. Make sure your answers are backed up by numbers.

1. Suppose that individual demand for a product is given by Q = 1200 - 5P. Marginal revenue is

MR = 200 - 0.4Q, and marginal cost is constant at $ 20. There are no fixed costs.

a. The firm is considering a quantity discount. The first 400 units can be purchased at a price of $120, and further units can be purchased at a price of $80. How many units will the consumer buy in total?

b. Show that this second- degree price- discrimination scheme is more profitable than a single monopoly price.

Reference no: EM13866336

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