A firm faces two types of consumers. Consumer A has an inverse demand of P = 120- 10 Q and consumer B has an inverse demand of P = 60-2Q. The firm has a constant marginal cost of $20. Assume the firm does not know which type a given consumer is. She offers to sell the good at a price of 70$ per unit. However, if the customer buys 10 or more units, she will offer a quantity discount and charge only 40$ per unit (including the first 10). Which consumer will use the price discount? Both consumers will chose the quantity discount. ONeither of the two consumers will opt for the quantity discount. Instead, both will purchase at the higher price of 70 and buy less than 10 units each. Customer A will choose the quantity discount and customer B will not choose the quantity discount. OCustomer B will choose the quantity discount and customer A will not choose the quantity discount. ONeither costumer will purchase from this firm at allI.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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A firm faces two types of consumers. Consumer A has an inverse demand of P = 120-
10 Q and consumer B has an inverse demand of P = 60-2Q. The firm has a constant
marginal cost of $20.
Assume the firm does not know which type a given consumer is. She offers to sell
the good at a price of 70$ per unit. However, if the customer buys 10 or more units,
she will offer a quantity discount and charge only 40$ per unit (including the first
10).
Which consumer will use the price discount?
Both consumers will chose the quantity discount.
Neither of the two consumers will opt for the quantity discount. Instead, both
will purchase at the higher price of 70 and buy less than 10 units each.
Customer A will choose the quantity discount and customer B will not choose
the quantity discount.
Customer B will choose the quantity discount and customer A will not choose
the quantity discount.
Neither costumer will purchase from this firm at all.
Transcribed Image Text:A firm faces two types of consumers. Consumer A has an inverse demand of P = 120- 10 Q and consumer B has an inverse demand of P = 60-2Q. The firm has a constant marginal cost of $20. Assume the firm does not know which type a given consumer is. She offers to sell the good at a price of 70$ per unit. However, if the customer buys 10 or more units, she will offer a quantity discount and charge only 40$ per unit (including the first 10). Which consumer will use the price discount? Both consumers will chose the quantity discount. Neither of the two consumers will opt for the quantity discount. Instead, both will purchase at the higher price of 70 and buy less than 10 units each. Customer A will choose the quantity discount and customer B will not choose the quantity discount. Customer B will choose the quantity discount and customer A will not choose the quantity discount. Neither costumer will purchase from this firm at all.
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