Second-degree price-discrimination scheme

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Reference no: EM131193865

Suppose that individual demand for a product is given by Q_D=1000-5P. Marginal revenue is MR=200-0.4Q, and marginal cost is constant at $20.

There are no fixed costs.

a. The firm is considering a quantity discount. The first 400 units can be purchased at a price of $120, and further units can be purchased at a price of $80. How many units will the consumer buy in total?

b. Show that this second-degree price-discrimination scheme is more profitable than a single monopoly price.

Reference no: EM131193865

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