The inverse demand for a product is P=50-0.1Q, and the mc to produce is $10. What...
The inverse demand for a product is P=50-0.1Q, and the mc to produce is $10. What is the best pricing strategy for this firm: charging all customers the same price, 2-part pricing, or block pricing?
Homework Answers
The form has to charge same price to all customers because only one demand curve exists for this product.
P=50-0.1Q
TR=PQ
TR=50Q-0.1Q^2
MR=d(TR)/dQ
MR=50-0.2Q
MC=10
At equilibrium MR=MC
50-.2Q=10
.2Q=40
Q=200
P=50-.1(200)
P=30
Firm charges $30 to all customers
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