We know profit maximization for a firm that is able to set a single price occurs when the firm pro- duces the quantity at which MR = MC. If a producer is able to price discriminate, however, then prof- its can be even higher. Part A Pricing with Market Power and Consumer Surplus Pat's Patriotic Tattoos is the only tattoo parlor in town. Pat tattoos only images of the American flag. There are 20 consumers who are willing to buy a tattoo. Each consumer is interested in buying only one tattoo, but they vary in their willingness to pay. One consumer is willing to pay $20 for a tattoo; another is willing to pay $19; a third, $18, down to the consumer least willing to pay who has a reservation price of $1. 1. The demand schedule is given below in Figure 36.1. Complete the table. Figure 36.1. Demand Schedule Price $20 Quantity Total Revenue Marginal Revenue 19 18 3 17 4 16 5 15 6 14 7 13

We know profit maximization for a firm that is able to set a single price occurs when the firm pro- duces the quantity at which MR = MC. If a producer is able to price discriminate, however, then prof- its can be even higher. Part A Pricing with Market Power and Consumer Surplus Pat's Patriotic Tattoos is the only tattoo parlor in town. Pat tattoos only images of the American flag. There are 20 consumers who are willing to buy a tattoo. Each consumer is interested in buying only one tattoo, but they vary in their willingness to pay. One consumer is willing to pay $20 for a tattoo; another is willing to pay $19; a third, $18, down to the consumer least willing to pay who has a reservation price of $1. 1. The demand schedule is given below in Figure 36.1. Complete the table. Figure 36.1. Demand Schedule Price $20 Quantity Total Revenue Marginal Revenue 19 18 3 17 4 16 5 15 6 14 7 13

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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