Question
a. A monopolist has two possible qualities of a product that offers: premium and basic. There are 30 potential customers. Each consumer buys at most
a. A monopolist has two possible qualities of a product that offers: premium and basic. There are 30 potential customers. Each consumer buys at most one unit of the product. Their valuations for each quality level are given in the following table.
Customers (10 in each group) | Valuation For Premium | Valuation For Basic |
1-10 | 300 | 150 |
11-20 | 150 | 100 |
21-30 | 90 | 50 |
Each unit of basic product costs 20, and premium product costs 40 to the monopolist. Which of the following gives the highest profit to the monopolist?
a) The monopolist sets the price of the basic product at 100 and the price of the premium product at 250.
b) The monopolist sets the price of the basic product at 100 and the price of the premium product at 300.
c) The monopolist sets the price of the basic product at 150 and the price of the premium product at 300.
d) The monopolist sets the price of the premium product at 150 and does not offer the basic product.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started