Illustrate what is total profit in this case

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Reference no: EM1371132

Q. Suppose a firm faces two customers: Larry and James. Each of se consumers has utility function u(x)+m, where x is level of consumption of good produced by firm and m is money left over for or purchases. Both consumers initially have $100 to spend. For Larry, function u is provided by u(x)=6x-x2. For James, it is u(x)=8ln(x+1). This firm has constant marginal costs equal to $2.

a. For each consumers, illustrate what is best (first-degree price discrimination, profit maximizing) offer to make to that consumer? Illustrate what is total profit dealing with se two consumers?

b. Suppose firm sets an entry fee plus per-unit price for each consume. It can tailor entry fee and per-unit price to individual consumer. Illustrate what are best (profit-maximizing) entry fees and per-unit prices for it to set? Illustrate what is total profit in this case?

c. Suppose firm must charge a single linear price for its output, in non-discriminattheory fashion. Illustrate what is best (profit-maximizing) price for it to charge? Illustrate what is total profit?



Reference no: EM1371132

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