A Firm Sells Its Product to Two Groups of Buyers

question 27

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. Assuming both daytime and nighttime markets are served,the optimal fixed access charge A*) is

• A)A* = $1,472
• B)A* = $2,178
• C)A* = $3,872
• D)A* = $4,356
• E)A* = $7,744

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Definitions:

Scarce Resources

Limited availability of inputs required to produce goods and services, such as labor, land, and capital, necessitating choices and priorities in their utilization.

Unlimited Wants

The concept that human desires and aspirations are endless, which drives continual economic demand and consumption.

Scarce Resources

Natural or man-made assets that are limited in supply, making them valuable for the production of goods and services.

Unlimited Wants

Refers to the insatiable desire of consumers to possess goods and services that provide utility, exceeding the resources available to fulfill them.