Homework Answers
Answer 12) The following table gives the willingness to pay for phone and accessories for both consumers. We can find out the total willingness to pay for the bundle just by adding the willingness to pay for phone and accessories.
In order to maximize profits, the firm would charge 790 from both of the consumers and earn a profit of 790*2 = 1,580. It will not charge 810 because it becomes higher than the willingness to pay of consumer A and he will not buy the bundle, the firm earns only 810 in this case.
Therefore, option d) charge $790 for a phone and accessories is the correct answer.
B) P=200-10Q
MC= $40
When P=MC, optimum quantity is produced.
200-10Q=40
Q=16 units
Figure 1
Consumer's valuation of 16 units = green area in figure 1 = 1/2 * (200-40) * 16 + 40*16 =1,280+640 = $1,920
Set the price equal to the Consumer's valuation of 16 units = $1,920
Therefore, option b)$1,920 is the correct answer
c) MC = $15 = ATC
For the first three units, the firm charges $40 per unit. Given the cost is $15, it earns $(40-15) = $25 on the first 3 units that it sells. Total profit from first three units = $25*3 = $75
For the next three units, the firm charges $20 per unit. Given the cost is $15, it earns $(20-15) = $5 on the next 3 units that it sells. Total profit from next three units = $5*3 = $15
Therefore total profits from all 6 units sold =$75+$15 = $90
Therefore, option d) $90 is the correct answer.
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