Let the Inverse Demand Curve for a Monopolist's Product Be $\frac { E } { Q } = \$ 70$

question 16

Multiple Choice

Let the inverse demand curve for a monopolist's product be P = 100 - 2Q and the marginal cost of production be constant at MC = 10. Suppose that the firm considers moving from a uniform pricing strategy to a two-block tariff where the first block provides 15 units at a price of P₁ = $70 and the second block provides an additional 15 units at a price of P₂ = $40. What is the average outlay schedule for the consumer?

• A) \(\frac { E } { Q } = \$ 70\) if Q?15 and\(\frac { E } { Q } = 70 - 450 / Q\) if Q>15
• B) \(\frac { E } { Q } = \$ 70\) if Q?15 and\(\frac { E } { Q } = 40 + 450 / Q\) if Q>15
• C) \(\frac { E } { Q } = \$ 70\) if Q?15 and\(\frac { E } { Q } = 40\) if Q>15
• D) \(\frac { E } { Q } = \$ 70\) if Q?15 and\(\frac { E } { Q } = 70 - 40 / Q\) if Q>15

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