3. You are the manager of a firm that charges customers $16 per unit for the first unit purchased, and $12 per unit for each additional unit purchased in excess of one unit. The accompanying graph summarizes your relevant demand and costs.

a. What is the economic term for your firm’s pricing strategy?

b. Determine the profits you earn from this strategy.

c. How much additional profit would you earn if you were able to perfectly price discriminate?

Transcribed Image Text:

Price 19 18 17 16 15 14 13 12 11 10 4- 9876543210 MC-AC- D 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 Quantity