Suppose Two Types of Consumers Buy Suits

question 124

Multiple Choice

Suppose two types of consumers buy suits.Consumers of type A will pay $100 for a coat and $50 for pants.Consumers of type B will pay $75 for a coat and $75 for pants.The firm selling suits faces no competition and has a marginal cost of zero.If the firm can identify each consumer type and can price discriminate,what is the optimal price for a pair of pants?

• A) Charge both types $150.
• B) Charge both types $75.
• C) Charge type A consumers $50, and type B consumers $75.
• D) Charge type A consumers $50, and type B consumers $50.

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Definitions:

Post-secondary

Relating to education after high school, including college, university, and vocational or technical training.

Compounded

The process where interest earned on an investment is reinvested to earn additional interest over time.

Nominal Rate

The advertised or stated interest rate of an investment or loan, not accounting for compounding or inflation.

Endowment

An endowment is a financial asset, in the form of money or property, donated to institutions or individuals, typically used for a specific purpose like a scholarship fund.