You are the manager of a firm that charges customers $16 per unit for the first unit purchased, and $12 per unit for each additional unit purchased in excess of one unit. The accompanying graph summarizes your relevant demand and costs.
"The horizontal axis labeled quantity ranges from 0 to 7 in increments of 1. The vertical axis labeled price ranges from 0 to 20 in increments of 2. A line labeled D begins at the point (0, 18) goes down to the right and ends at the point (6, 6). A horizontal line labeled M C = A C passes through the point (0, 8) and intersects the line D at (5, 8)."
a. What is the economic term for your firm’s pricing strategy?
b. Determine the profits you earn from this strategy.
$
c. How much additional profit would you earn if you were able to perfectly price discriminate?
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