Question
ACME is a monopolist that makes a DELUXE product and a BASIC product useful for capturing road runners (i.e., desert birds). ACME incurs no costs
ACME is a monopolist that makes a DELUXE product and a BASIC product useful for capturing road runners (i.e., desert birds). ACME incurs no costs related to these products. There are HIGH-type and LOW-type consumers (i.e., coyotes) for these products. Each consumer purchases at most one version of the product. HIGH-type consumers have willingness to pay (WTP) of 10 for DELUXE and 6 for BASIC. LOW-type consumers have WTP of 4 for DELUXE and 4 for BASIC. ACME cannot discern whether an individual consumer is HIGH-type or LOW-type. There are an equal number of HIGH-type and LOW-type customers. What prices maximize profit?
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