2. Suppose you are a cereal salesman. You are considering multiple scenarios in order to maximize...

2. Suppose you are a cereal salesman. You are considering multiple scenarios in order to maximize your profit. The demand for a representative consumer is given by: P =80−16b. b represents a serving of cereal. You also face a variable cost of 4b. Lastly, suppose that there are 50 individuals.

(a) Suppose you are able to perfectly price discriminate. What is the price? What is the quantity?

(b) If you can perfectly price discriminate, what is your profit?

(c) If this were a two-part tariff setup, what is your price, quantity, and profit?

Expert Solution

Rahul Sunny answered 1 year ago

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