Dunder Mifflin sells specialty paper to commercial clients in the Scranton area. Some of Dunder Mifflin's clients are seen as 'intensive users' who are price-sensitive, and have demands given by: P = 8 – 0.1Q where Q is the number of reams of paper desired per week. Other clients are less-intensive users of paper and have inverse demands given by: P = 10 – 0.2Q. If Dunder Mifflin's marginal cost of paper is zero, and it attempts to separate more-intensive and less-intensive buyers, what price should Dunder Mifflin set for each group? How much profit do they earn under this system?

Dunder Mifflin sells specialty paper to commercial clients in the Scranton area. Some of Dunder Mifflin's clients are seen as 'intensive users' who are price-sensitive, and have demands given by: P = 8 – 0.1Q where Q is the number of reams of paper desired per week. Other clients are less-intensive users of paper and have inverse demands given by: P = 10 – 0.2Q. If Dunder Mifflin's marginal cost of paper is zero, and it attempts to separate more-intensive and less-intensive buyers, what price should Dunder Mifflin set for each group? How much profit do they earn under this system?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.3P

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