Suppose two types of consumers buy suits. Consumers of type A will pay $100 for
ID: 1097458 • Letter: S
Question
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm can identify each consumer type and can price discriminate, what is the optimal price for a pair of pants?
A
Charge both types $150.
B
Charge both types $75.
C
Charge type A consumers $50, and type B consumers $75.
D
Charge type A consumers $50, and type B consumers $50.
A
Charge both types $150.
B
Charge both types $75.
C
Charge type A consumers $50, and type B consumers $75.
D
Charge type A consumers $50, and type B consumers $50.
Explanation / Answer
Ans. When the firm is able to discriminate among the consumers then it will Charge type A consumers $50, and type B consumers $75 because firm is using price discrimination policy in which it charges different consumer different prices based on their ability to pay or willingness to pay.