In Questions a Firm Sells Its Product to Two

question 45

Multiple Choice

In Questions 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.
-Now suppose the marketing director wishes to serve both daytime and nighttime buyers, what is the MR_f function?

• A) MR_f = 5,000 - 200f
• B) MR_f = 7,500 - 250f
• C) MR_f = 8,000 - 250f
• D) MR_f = 7,500 - 200f

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Definitions:

Marginal Revenue Curve

A graph that shows the additional revenue a firm earns from selling one more unit of a good or service.

Upward Sloping

A characteristic of a graph or curve that rises from left to right, indicating a positive relationship between two variables.

Perfectly Competitive Firm

A business operating in a market where no single firm can influence the market price or market conditions, facing many competitors and selling identical products.

Long Run

A period sufficient for all inputs to production, including capital, to be varied.