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1. Company A wants help setting its price or prices. It knows that 20 men and 10 women are potential customers and that each potential customer buys at most 1 unit of output. The 20 amounts men are willing to pay are $50, $49, $47, $46, $44, $43, ..., $23, $22. The 10 amounts women are willing to pay are $48, $45, $42, ..., $21. Average total cost equals $28.5 for all levels of output.
a. What price maximizes profit if the firm charges the same price to men and women? What is the maximum profit?
b. What price maximizes total revenue if the firm charges the same price to men and women? What is the maximum total revenue?
c. What prices maximizes profit if the firm charges the different prices to men and women? What is the maximum profit?
d. How many units does the firm sell if it engages in 1st degree price discrimination? What is the maximum profit?

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Solution Summary

This solution describes the steps to determine maximum profit level in different pricing policies in Excel.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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