Consider a satellite internet provider which is the only firm servicing potential customersin remote locations of a small country. There are two types of clients: 1,000 big (B) farmsand 5,000 small (S) farms. The provider has no fixed costs and constant marginal cost.The law in the country does not allow the provider to set different prices for the same gooddepending on the identity of the consumer. But the firm can offer a low-bandwidth optionat a discounted price. The table below shows marginal costs for each type of service and thewillingness-to-pay of each customer type for each service.ServiceRegular (R)Low-bandwidth (L)As discussed in lecture, assume that consumers only purchase a service if it maximizes utility(willingness to pay minus price), and only if utility is at least zero. If a consumer is indifferentbetween two options, assume that the firm chooses which one the consumer picks.Marginal cost WTPB WTPS5164106 What is the highest price for the regular service that is consistent with second-degreeprice discrimination in this market (consumers self-selecting into different services)?(a) 20(b) 12(c) 10(d) 5(e) Is is impossible to implement second-degree price discrimination in this market.

Second-degree price discrimination is a pricing strategy where a seller charges different prices…

Consider a satellite internet provider which is the only firm servicing potential customers in remote locations of a small country. There are two types of clients: 1,000 big (B) farms and 5,000 small (S) farms. The provider has no fixed costs and constant marginal cost. The law in the country does not allow the provider to set different prices for the same good depending on the identity of the consumer. But the firm can offer a low-bandwidth option at a discounted price. The table below shows marginal costs for each type of service and the willingness-to-pay of each customer type for each service. Service Marginal cost WTPB WTPS

Consider a satellite internet provider which is the only firm servicing potential customers in remote locations of a small country. There are two types of clients: 1,000 big (B) farms and 5,000 small (S) farms. The provider has no fixed costs and constant marginal cost. The law in the country does not allow the provider to set different prices for the same good depending on the identity of the consumer. But the firm can offer a low-bandwidth option at a discounted price. The table below shows marginal costs for each type of service and the willingness-to-pay of each customer type for each service. Service Marginal cost WTPB WTPS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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