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Second-degree price discrimination

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Reference no: EM132559624

You are a monopolist with many identical customers. Each customer will buy either zero, one or two units. Customers have a marginal value of $50 for the first unit and $20 for the second. The cost to produce output has a constant marginal cost of $5 per unit.

a. If you could not engage in second-degree price discrimination what price would you charge? How much profit would you earn?

b. If you could bundle the units into packs of two what price could you charge and how much profit would you make?

Reference no: EM132559624

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