A Firm Sells Its Product to Two Groups of Buyers

question 27

Multiple Choice

A firm sells its product to two groups of buyers: daytime buyers and nighttime buyers.There are 50 daytime buyers,all of whom have identical demands given by D_D in the figure below.There are 50 nighttime buyers,all of whom have identical demands given by D_N in the figure below.The firm's variable costs are constant (SMC = AVC = $12) and its total fixed cost is $250,000.The marketing director must devise a two-part pricing plan that will maximize the firm's profit. Suppose the marketing director ignores the nighttime market and wishes to extract all consumer surplus from the daytime buyers.By setting the optimal access charge and user fee,the firm will earn $_________ of profit on each one of the 50 daytime buyers.

• A)$1,872.
• B)$1,936.
• C)$7,744.
• D)$9,856.

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Definitions:

Lot-For-Lot

A production planning method where the exact quantity required for production or demand is ordered or produced, without excess.

Setup Cost

Refers to the expenses incurred to prepare equipment or processes for manufacturing an order.

Inventory Holding Cost

Refers to the total cost associated with storing unsold goods, including expenses such as warehousing, depreciation, spoilage, and insurance.