Question
In: Economics
2) Two types of customers make up the market for Armoyas. There are 100 type A...
2) Two types of customers make up the market for Armoyas. There are 100 type A customers, each of whom is willing to pay up to $10 for an Armoya. There are 50 type B customers, each willing to pay up to $8 for an Armoya. No customer wishes to buy more than a single Armoya. The monopolist cannot differentiate between the types of customer. The average and marginal cost of production is constant at $6/Armoya.
a) What is the selling price of the good, and how much profit does the monopolist make?
b) The monopolist is offered the opportunity to advertise Armoyas at a cost of $80. The advertisement is predicted to attract another 100 type B customers. Will the advertisement be placed? What is the selling price of the good, and how much profit does the monopolist make?
c) Suppose the advertisement attracts no new customers, but raises the price all existing customers are willing to pay by $1. Will the advertisement be placed? What is the selling price of the good, and how much profit does the monopolist make?
Solutions
Rahul Sunny answered 2 months agoRelated Solutions
Two types of customers make up the market for Armoyas. There are 100 type A customers,...
Two types of customers make up the market for Armoyas. There
are 100 type A customers, each of whom is willing to pay up to $10
for an Armoya. There are 50 type B customers, each willing to pay
up to $8 for an Armoya. No customer wishes to buy more than a
single Armoya. The monopolist cannot differentiate between the
types of customer. The average and marginal cost of production is
constant at $6/Armoya.
a)What is the selling price...
Two types of customers make up the market for Armoyas. There are 80 type A customers,...
Two types of customers make up the market for Armoyas. There
are 80 type A customers, each of whom is willing to pay up to $10
for an Armoya. There are 40 type B customers, each willing to pay
up to $8 for an Armoya. No customer wishes to buy more than a
single Armoya. The monopolist cannot differentiate between the
types of customer. The average and marginal cost of production is
constant at $6/Armoya.
What is the selling price...
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