A Firm Sells Its Product to Two Groups of Buyers

question 3

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. To maximize profit a price discriminating firm should

• A)produce the output at which total marginal revenue equals marginal cost.
• B)allocate the optimal output so the elasticity is the same in each market.
• C)allocate the output so that marginal revenue is the same in each market.
• D)both a and c
• E)all of the above

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Definitions:

Logical

Pertaining to clear, formal reasoning, or relating to the use of reason and understanding to assess ideas and arguments.

Intuitive Thinking

Intuitive thinking is a cognitive process that occurs without explicit reasoning, relying on instinctive feelings rather than systematic analysis of information.

Rational

Based on or in accordance with reason or logic.

Logical

Pertaining to or characterized by clear, sound reasoning and thought processes.