Question
Your firm produces two products, and has three consumer types, each of which represent 1/3 of the market. Each consumers' willingness to pay for each
Your firm produces two products, and has three consumer types, each of which represent 1/3 of the market. Each consumers' willingness to pay for each good is given in the following table
Consumer: | GOOD 1 | GOOD 2 |
A | $600 | $100 |
B | $1000 | $50 |
C | $350 | $150 |
Suppose both goods are produced at zero marginal cost. If the goods cannot be bundled, what is the optimal price to charge for each good?
If the goods can be bundled, what is the optimal price to charge for each bundle? What is the total profit? Should your firm bundle or not?
Suppose the production of each good entails a marginal cost of $90 (so the MC of the bundle is $180). How would this this change your answers to a. and b. above?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started