What is the profit-maximizing pricing policy

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Reference no: EM133288028

Question: Microsoft's inverse demand for the new operating system is given by P = 100 - Q

The marginal cost is assumed to be zero and fixed costs are $1000. Assume that Microsoft can charge different prices on two segments of the market: individual buyers and firms. The demands on two segments are:

PI = 40 - 5/4QI

PF = 250 - 5QF

a. What is the profit-maximizing pricing policy if Microsoft charges a different price to each customer segment?

b. What if price discrimination is not allowed, what is the profit maximizing uniform price?

c. Calculate the producer and consumer surplus in part a and b. Which pricing policy achieves highest total surplus?

Reference no: EM133288028

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