You are the manager of a firm that charges customers $16 per unit for the first unit purchased, and $12 per unit for each additional unit purchased in excess of one unit. The accompanying graph summarizes your relevant demand and costs.

a. What is the economic term for your firm's pricing strategy?

• Third degree price discrimination
• Fourth degree price discrimination
• First degree price discrimination
• Second degree price discrimination

b. Determine the profits you earn from this strategy.

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c. How much additional profit would you earn if you were able to perfectly price discriminate?

Instruction:In solving this problem, assume the firm cannot sell fractions of a unit.

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