(a) Assuming that the company producing EasyTax can distinguish between sophisticated and unsophisticated users (because, for instance, the sophisticated users are registered accountants), what are the optimal prices to be charged to each category of users? What is the company's profit? (b) Assume now that the company cannot distinguish between the two types of user. What are the optimal prices for the two versions? What is the total profit?
(a) Assuming that the company producing EasyTax can distinguish between sophisticated and unsophisticated users (because, for instance, the sophisticated users are registered accountants), what are the optimal prices to be charged to each category of users? What is the company's profit? (b) Assume now that the company cannot distinguish between the two types of user. What are the optimal prices for the two versions? What is the total profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Answer should be typed.

Transcribed Image Text:Question 2
EasyTax markets both a deluxe and a standard version of its software. The deluxe version contains
additional features that are likely to appeal to sophisticated users. The marginal costs of producing
and distributing the two versions are virtually equal, and equal to zero. The market is equally divided
into two types of users, sophisticated and unsophisticated (and assume one user of each type). The
maximum willingness to pay for both types of users for the standard and deluxe versions are given
in the following table:
Standard
20
35
Deluxe
20
100
Unsophisticated
Sophisticated
(a) Assuming that the company producing EasyTax can distinguish between sophisticated and
unsophisticated users (because, for instance, the sophisticated users are registered
accountants), what are the optimal prices to be charged to each category of users? What is
the company's profit?
(b) Assume now that the company cannot distinguish between the two types of user. What are
the optimal prices for the two versions? What is the total profit?
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON

Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education