A Firm Sells Its Product to Two Groups of Buyers

question 41

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. Suppose the marketing director ignores the nighttime market and wishes to extract all consumer surplus from the daytime buyers.By setting the optimal access charge and user fee,the firm will earn $_________ of profit on each one of the 50 daytime buyers.

• A)$1,872.
• B)$1,936.
• C)$7,744.
• D)$9,856.

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Definitions:

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource, such as labor or capital.

Variable Input

An input whose quantity can be changed in the short term by a firm to adjust the level of output.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production, like labor or capital.

Marginal Cost

The cost implicated in the production of one more unit of a good or service.