Please help me solve this question: You sell chairs; they cost your $20 each to

Question

Please help me solve this question:

You sell chairs; they cost your $20 each to produce and sell. In your world there are 7 potential buyers for your chairs, listed below: (Each person will buy a maximum of 1 chair each.) Calculate the profit-maximizing quantity of chairs and total profits if you use 1st degree price discrimination. (You are a psychic.) Calculate the profit-maximizing quantity of chairs and total profits if price discrimination is banned by government (and you are a law-abiding citizen).

Explanation / Answer

a). after Price discrimination, seller will sell chair to all those who are willing to pay more than $20 so that hecan maximize his profit,

Max profit = 50+40+30+25-20*4 = $65

b).

if price discrimination os banned,

Let Price be P

Profit = P*x-20x

suppose Price is $25

then all the buyer whose reservation pricce is $25 or fgrreater than that they will purchase

Profit = 25*4-20*4 = $20

suppose Price is $30

Profit = 30*3-20*3 = $30

suppose prrice is $40

Profit = 40*2-20*2 = $40

suppose Price is $50

Profit = 50*1-20*1 = $30

MaximumProfit @ $40 = $40

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