Question

ducts differently, but you are unable particular, you know a. Determine the optimal numele UI b. How much should the firm charge for this package! 1. You are the manager of a firm that produces products X and r at zero cost. You that different types of consumers value your two products diferently, but you are to identify these consumers individually at the time of the sale. In particular, yo there are three types of consumers (1,000 of each type) with the following valuation the two products: (LO2) Consumer Type Product X $90 Product Y $ 60 140 160 70 40 a. What are your firm's profits if you charge $40 for product X and $60 for product Y2 b. What are your profits if you charge $90 for product X and $160 for product Y? c. What are your profits if you charge $150 for a bundle containing one unit of product X and one unit of product Y? d. What are your firm's profits if you charge $210 for a bundle containing one unit of X and one unit of Y, but also sell the products individually at a price of $90 for product X and $160 for product Y?

Answer 1

A) given cost are zero, so total revenue is equal to total profit.

If firm charge 40 for X then all three type of CONSUMER will buy good x

TR=3000*40=12,000

If firm charge 60 for good y,then all three type will buy good Y ,

TR=3000*60=18,000

Total profit=12,000+18,000=30,000

B)

If firm charge 90 for good X then only type 1 CONSUMER will buy.

TR=90*1000=90,000

If firm charge 160,for good Y, then only CONSUMER type 3 will buy good Y,and

TR=160*1000=160,000

Total profit=90,000+160,000=250,000

C)

CONSUMER willing to pay for bundle,

Type 1=90+60=150

Type 2=70+140=210

Type 3=40+160=200

If firm charge 150 for bundle then all three type of CONSUMER will buy bundle, and

TR=150*3000=450,000

D)given bundle price =210

And separately price of X=90

And y=160

CONSUMER type 1 willing to pay 150 for bundle,so he won't buy the bundle.

They willing to pay 60 for y ,so they also won't buy y.

They will only buy X.

TR=1000*90=90,000

CONSUMER type is Willing to pay for bundle=210,

But buying separately cost them =160+90=250,

So type 2 consumer will buy the bundle

TR=210*1000=210,000

CONSUMER type 3 willing to pay for bundle is 200

So he also won't buy bundle.

He is willing to pay for X is 40 so he won't buy X either.

He will only buy good y.

TR=160*1000=160,000

Total profit=90,000+210,000+160,000=460,000