A Firm Sells Its Product to Two Groups of Buyers

question 4

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. If a firm is selling a product in two markets,A and B,and the marginal revenue in A is $25 and the marginal revenue in B is $20,the firm should

• A)charge a higher price in A where MR is higher
• B)charge a lower price in B where MR is lower
• C)sell more in B and less in A
• D)sell more in A and less in B
• E)both a and c

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Definitions:

Direct Method

A cash flow statement preparation approach that lists major cash receipts and payments during the period.

Bad Debts Recovered

Previously written off debts that have unexpectedly been collected.

Allowance Method

An accounting technique used to estimate and account for bad debts, allowing companies to anticipate uncollectible accounts receivables.

Bad Debts Expense

An expense account reflecting the value of sales that were made on credit and are unlikely to be collected.