Question

Suppose a firm has two types of customers but cannot tell which type of buyer a customer is before a purchase is made. One group of customers has an inverse demand of P = 100 – 10Q, while another group of customers has an inverse demand curve of P = 110 – 22.5Q. If the firm wanted to use a quantity discount pricing scheme, what prices should it set? Assume that the marginal cost of production is constant at $20.

A) The firm could charge $65 per unit for any quantity purchased or $60 per unit if buying 4 or more units.

B) The firm could charge $50 per unit for any quantity purchased or $40 per unit if buying 8 or more units.

C) The firm could charge $25 per unit for any quantity purchased or $20 per unit if buying 2 or more units.

D) The firm could charge $85 per unit for any quantity purchased or $75 per unit if buying 6 or more units.

I know the answer is A but do not understand how to get there. thanks!

Answer 1

The answer and procedures of the exercise are attached in the following archives.

Step-by-step explanation:

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.