A local insurance company offers both home and auto insurance to four types of customers with the reservation prices listed in the figure below. Assume for simplicity that there is onlyone consumer of each type.HomeAutoBundleCustomer A$90$67$157Customer BCustomer CCustomer D$117$87$204$103$77$180$83$52$135If the firm were to sell home and auto insurance separately, it would charge $83 for home insurance, $52 for auto insurance, and earn a combined revenue of $540.Determine the revenue the firm would receive if it used a pure bundle. Comparing the revenue of the pure bundle to the revenue of selling home and auto insurance separately, we can conclude that thereservation prices of the consumers must:O A. have no correlationB. be positively correlatedC. be negatively correlatedD. be serially correlated

Bundling is defined as the method of clubbing two goods together, it gives the consumers an option…

A local insurance company offers both home and auto insurance to four types of customers with the reservation prices listed in the figure below. Assume for simplicity that there is only one consumer of each type.

A local insurance company offers both home and auto insurance to four types of customers with the reservation prices listed in the figure below. Assume for simplicity that there is only one consumer of each type.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 13E

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Question

A local insurance company offers both home and auto insurance to four types of customers with the reservation prices listed in the figure below. Assume for simplicity that there is only
one consumer of each type.
Home
Auto
Bundle
Customer A
$90
$67
$157
Customer B
Customer C
Customer D
$117
$87
$204
$103
$77
$180
$83
$52
$135
If the firm were to sell home and auto insurance separately, it would charge $83 for home insurance, $52 for auto insurance, and earn a combined revenue of $540.
Determine the revenue the firm would receive if it used a pure bundle. Comparing the revenue of the pure bundle to the revenue of selling home and auto insurance separately, we can conclude that the
reservation prices of the consumers must:
O A. have no correlation
B. be positively correlated
C. be negatively correlated
D. be serially correlated

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