The average variable cost is constant

Assignment Help Business Economics

Reference no: EM131392044

Suppose that John is the only TV seller in Madison. The average variable cost is constant at $20. There is no fixed cost. Suppose further that each consumer may buy up to one TV.

1. Suppose that there are only rich people in Madison and there are 20 of them. Each is willing to pay up to $50 for each TV. What should be the price of TVs to maximize John’s profit?

2. Instead, suppose that there are 3 groups of consumers, high income, medium income and low income and there are 20 of them in each group. Each of the rich is willing to pay up to $50. Each of the medium is willing to pay up to $40. Each of the poor is willing to pay up to $10. If John is able to price discriminate, what would be his maximum attainable profit?

3. From the previous question, suppose instead that John cannot charge different prices to different consumers, at which price should John sell TVs in order to maximize his profit?

Reference no: EM131392044

Questions Cloud

Foreign country and analyze its monetary system : Select a foreign country and analyze its monetary system. Research the country’s monetary system using at least five scholarly sources, including a minimum of three from the Ashford Online Library. Analyze the evolution of the country’s monetary syst..

The first globalization debate : What exactly is up for debate in “The First Globalization Debate,” in which Goodwin explores competing ideas in Defoe’s Robinson Crusoe and Swift’s Gulliver’s Travels? Briefly explain the economic logic underlying arguments for a globally integrated ..

Money supply in response to adverse demand : Suppose that country A pegs its currency to that of country B. Now suppose that there is an adverse demand shock in country A. Country B is more likely to cooperate and increase its money supply in response to A's adverse demand shock when:

The average variable cost is constant : Suppose that John is the only TV seller in Madison. The average variable cost is constant at $20. There is no fixed cost. Suppose further that each consumer may buy up to one TV. Suppose that there are only rich people in Madison and there are 20 of ..

What is a strategy for a player in this game : Supposed players 1 and 2 are participating in a first-price sealed bid auction with private, independent valuations. Each player's valuation of the object to be sold, which is assumed to be worth 0 to the seller, is either 0 or 2 with equal probabili..

Monopolist practices first degree price discrimination : Suppose the monopolist cannot separate the two groups of buyers, but he can observe and charge the marginal utility of each unit of purchase as in the case of 1st degree price discrimination. How many units will the monopolist sell to the two groups ..

When a single-price monopolist maximizes profits : When a single-price monopolist maximizes profits, price is greater than marginal cost. This means that buyers would be willing to pay more for additional units of output than the unit costs to produce. Given this, why doesn’t the monopolist produce m..

Major contemporary challenge to the international system : In your estimation, what is the major contemporary challenge to the international system at this point in time? Be sure to explain why this particular challenge is more substantive than all other challenges.

User Account

All Pages