A Firm Sells Its Product to Two Groups of Buyers

question 26

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. Assuming both daytime and nighttime markets are served,the optimal fixed access charge (A*) is

• A)A* = $1,472
• B)A* = $2,178
• C)A* = $3,872
• D)A* = $4,356
• E)A* = $7,744

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Definitions:

Substantial Evidence Test

A standard used in legal settings to determine if the evidence in support of a conclusion is adequate and meaningful.

Arbitrary and Capricious Test

A standard of review used by courts to assess the decision-making process of an administrative agency, ensuring decisions were made logically and not randomly.

De Novo Review

A new; over again; a second time. A trial de novo, for example, is a new trial in which the entire case is retried.

Beyond Reasonable Doubt Review

A standard of proof used in criminal trials to ensure guilt is determined with a high level of certainty, indicating no reasonable doubt of the defendant's guilt.