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Q1 (Quantity Discount) (2 points) The ClearLine Communications Corporation wants to know the optimal price for its long-distance service. Market research indicates that there are
Q1 (Quantity Discount) (2 points) The ClearLine Communications Corporation wants to know the optimal price for its long-distance service. Market research indicates that there are five types of consumers in the market (equal numbers of each type) demanding the following numbers of minutes/day at various prices/minute. According to this table, if ClearLine charges $1.00 for each minute, Type 1 customer will buy 5 minutes; Type 2 customer will buy 4 minutes; Type 3 customer will buy 3 minutes; so on so forth. Similarly, if ClearLine charges $2.00 for each minute, Type 1 customer will buy 4 minutes; Type 2 customer will buy 3 minutes; so on so forth. Assume zero marginal and fixed costs. a. If ClearLine can only charge uniform price, compute the profit-maximizing price for each minute. (1 point) b. If ClearLine can charge different price for different minute, compute the profitmaximizing quantity-discount scheme. (1 point)
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