This chapter explains that a firm that engages in second-degree ...

[Brittanyd9008]

This chapter explains that a firm that engages in second-degree price discrimination charges the same consumer different prices for different units of a good. You are a monopolist with many identical customers.
 
  Each will buy either zero, one, or two units of the good you produce. A consumer is willing to pay 50 for the first unit of this good and 20 for the second. You produce this good at a constant average and marginal cost of 5 . For simplicity, assume that if a consumer is indifferent between buying and not buying that he will buy. a. If you could not engage in second-degree price discrimination, what price would you charge? How much profit per customer would you earn? b. Suppose you offer your customers what seems to be a very generous deal: Buy one at the regular price of 50, and get 60 percent off on a second. How many units of this good will each customer buy? How much profit per customer will you earn?

Question 2

If society decides it wants more of one good and ________, then it has to give up some of another good and incur some opportunity costs.
 
  A) new resources are discovered B) all resources are fully utilized
  C) technology advances D) resources are underutilized

[lucas dlamini]

Answer to Question 1

a. This part of the question is similar to part (a) of Problem 9 above. The only sensible prices to consider are 50 and 20 . You will earn a profit per customer of 50 - 5 = 45 if charge 50, you will earn a profit per customer of 40 - 10 = 30 if you charge 20, and therefore you should charge a price of 50
b. A consumer will buy two units when you offer Buy one at the regular price of 50, 60 percent off on a second. 60 off means the price of the second unit will be 50  (60 x 50) = 20, which equals your customer's willingness to pay for a second unit. Your total revenue per customer will be 50 + 20 = 70, your total cost per customer will be 10, and your profit per customer will be 70 - 10 = 60

Answer to Question 2

B