Question
A firm has estimated that the demand for its product comes from two types of customers, I and II. Each type I customer (there are
A firm has estimated that the demand for its product comes from two types of customers, I and II. Each type I customer (there are 45 of them) has a demand curve given by Q = 20 P, while each type II customer (there are 50 of them) has a demand curve given by Q = 15 P. The firm's marginal cost is constant and equal to $5. Suppose the firm wants to use a two-part pricing strategy (T,P) and it has decided to set P = $5 (we know this need not be optimal, but this is what the firm has decided to set). With P = $5, the profit-maximizing T is:
Please show step-by-step work - The correct answer is B. I am in need of seeing a breakdown of the steps to obtain the answer:
a) T = $50. b) T = $112.5. c) T = $25 d) None of the above.
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