Given the demand equation and MC in problem # 1 (demand equation: Q = 40 –...

Given the demand equation and MC in problem # 1 (demand equation: Q = 40 – 0.5P. Marginal cost is MC = $20.), suppose the firm decides to offer quantity discount by selling the product in bundles of 10 units. Answer the following questions. A graph would help you with this question, but you do not need to include the graph in your answer.

a. What is the maximum price that the firm can charge for the first 10 units, for the second 10 units, and for the third 10 units? Now compute the revenue and cost of selling the three bundles (a total 30 units)

b. Which pricing strategy (quantity discount or two-part) is more beneficial to the business? Why?

Expert Solution

Rahul Sunny answered 1 year ago

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