A firm that sells three products X, Y, and Z faces three types of consumers. The consumers' willingness to pay for the products and the marginal cost of providing each product are summarized in the following table. The number of type 1 and type 2 consumers are 70 and 30 respectively. a. If a firm is to offer separate prices for each product, what prices should it set? Compute the profits of the firm if the three products are sold separately. b. Suppose now the firm sells the three products in one package. De termine the profit maximizing price of the package. Also compute the corresponding profit level. c. Based on your answers in part a. and b., conclude whether the firm should sell the three items separately or tie them in a package. (20 points) A firm that sells three products X, Y, and Z faces three types of consumers. The consumers' willingness to pay for the products and the marginal cost of providing each product are summarized in the following table. Product Z Product X Product Y Type 1 Consumer $10 $10 Type 2 Consumer $5 $10 Marginal cost $2 $3 $60 $100 $40 The number of type 1 and type 2 consumers are 70 and 30 respectively. a. If a firm is to offer separate prices for each product, what prices should it set? Compute the profits of the firm if the three products are sold separately. b. Suppose now the firm sells the three products in one package. De- termine the profit maximizing price of the package. Also compute the corresponding profit level. c. Based on your answers in part a. and b., conclude whether the firm should sell the three items separately or tie them in a package.
A firm that sells three products X, Y, and Z faces three types of consumers. The consumers' willingness to pay for the products and the marginal cost of providing each product are summarized in the following table. The number of type 1 and type 2 consumers are 70 and 30 respectively. a. If a firm is to offer separate prices for each product, what prices should it set? Compute the profits of the firm if the three products are sold separately. b. Suppose now the firm sells the three products in one package. De termine the profit maximizing price of the package. Also compute the corresponding profit level. c. Based on your answers in part a. and b., conclude whether the firm should sell the three items separately or tie them in a package. (20 points) A firm that sells three products X, Y, and Z faces three types of consumers. The consumers' willingness to pay for the products and the marginal cost of providing each product are summarized in the following table. Product Z Product X Product Y Type 1 Consumer $10 $10 Type 2 Consumer $5 $10 Marginal cost $2 $3 $60 $100 $40 The number of type 1 and type 2 consumers are 70 and 30 respectively. a. If a firm is to offer separate prices for each product, what prices should it set? Compute the profits of the firm if the three products are sold separately. b. Suppose now the firm sells the three products in one package. De- termine the profit maximizing price of the package. Also compute the corresponding profit level. c. Based on your answers in part a. and b., conclude whether the firm should sell the three items separately or tie them in a package.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A firm that sells three products X, Y, and Z
faces three types of consumers. The consumers'
willingness to pay for the products and the marginal
cost of providing each product are summarized in the
following table. The number of type 1 and type 2
consumers are 70 and 30 respectively. a. If a firm is to
offer separate prices for each product, what prices
should it set? Compute the profits of the firm if the three
products are sold separately. b. Suppose now the firm
sells the three products in one package. De termine
the profit maximizing price of the package. Also
compute the corresponding profit level. c. Based on
your answers in part a. and b., conclude whether the
firm should sell the three items separately or tie them in
a package.
(20 points) A firm that sells three products X, Y, and Z faces three
types of consumers. The consumers' willingness to pay for the products
and the marginal cost of providing each product are summarized in the
following table.
Product Z
Product X Product Y
Type 1 Consumer
$10
$10
Type 2 Consumer
$5
$10
Marginal cost
$2
$3
$60
$100
$40
The number of type 1 and type 2 consumers are 70 and 30 respectively.
a. If a firm is to offer separate prices for each product, what prices
should it set? Compute the profits of the firm if the three products
are sold separately.
b. Suppose now the firm sells the three products in one package. De-
termine the profit maximizing price of the package. Also compute
the corresponding profit level.
c. Based on your answers in part a. and b., conclude whether the
firm should sell the three items separately or tie them in a package.
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