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CHAPTER 11 HOMEWORK You should show detailed calculations/processes and explanations. Answer itself is NOT sufficient. 2. Based on the following graph (which summarizes the demand, marginal revenue, and relevant costs for your product), determine your firm's optimal price, output, and the resulting profits for each of the following scenarios: Price 110 4 100 - 90 80 70 60 50 40 30 20 MC = AC 10 MR 0. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Quantity a. You charge the same unit price to all consumers. Considering that MC=MR, the graph shows that Q = 4. So, the monopoly equilibrium price would be $60. II = TR-TC = P *Q -AC *Q = $60 * 4 - $20 * 4 = $160 Optimal Price = $60 per unit Output = 4 units Resulting Profit = $160b. You engage in rst-degree price discrimination. First-degree discrimination is when a rm charges each consumer the maximum mmey would be willing to pay for each unit of the good purchased. In this case, Based on the graph, the rm would charge $90 for the first unit, $80 for the second unit, $70 for the third unit, $60 for the fourth unit, $50 for the fth unit, $40 for the sixth unit, $30 for the seventh unit, and $20 for the eighth unit. The firm wouldn't sell anything beyond the 8341.113: begagsg marginal cost is greater than the price followed by the demand curve. Prots = 8($100 - $20](.5] = $320 Optimal Price = The price the firm can charge as followed by the demand curve 9%: 8 units Resulting Prot = $320 0. You engage in two-part pricing. Under the two-part pricing, a rm will charge a fixed fee for the right to purchase their goods, and a per unit charge for each unit purchased. The xed fee is $320. The per unit price is $20. The optimal output under two-part pricing is 8 units. So, Optimal Price = $320 Output = 8 units Resulting Prot = $3 20 d. You engage in block pricing. Under block pricing, the rm will charge the amount equal to the total value that the consumer places on the given bundle of that good. Package Price = [.5]($100-$20] * 8 + $20 * 8 = $320 + $160 = $480 (The amount the rm would charge for the bundle of 8 units]. Prot = TR TC = 4-80 20 * B = $320 Under block pricing, the rm charges $480 for the bundle of 8 units while making a profit of $320