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Consider the following demand for Ross Home Accents’ handmade candles: Q P 1 38 2 36...

Consider the following demand for Ross Home Accents’ handmade candles:

Q P
1 38
2 36
3 34
4 32
5 30
6 28
7 26
8 24
9 22
10 20

Suppose the marginal cost of producing each candle is $10.

(a) Obtain the profit-maximizing single price for Ross Home Accents’ candles and its profit.

(b) From the table above, calculate the consumer surplus obtained by consumers of Ross’ candles. Explain why this consumer surplus constitutes a loss for Ross in the form of money left on the table.

(c) Calculate the loss for Ross in the form of passed-up profit.

(d) Now, imagine Ross discovers that it has the technology to identify consumers and segment them into separate groups and charge them different prices for its product. What kind of price discrimination is Ross engaging in? Pick two possible different prices for two segments and calculate the associated profit for Ross.

(e) Calculate the associated losses (money left on the table and passed-up profit).

(f) Explain the difference you observe between the losses obtained in (e) from price discrimination and those in (b) and (c) when Ross charges a single price.

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