An umbrella manufacturer sells its product in Nevada and Oregon. Due to different climates, each state has different demands for umbrellas. The marginal cost of production is the same in each state and is a constant $10. The demand curve for raincoats in each state is: Qoregon = 120-2P (or P = 60 -0.5QOregon) QNevada = 60 - 4P (or P = 15 -0.25QNevada) The umbrella manufacturer wants to practice third-degree price discrimination. How much should it charge in each state? (Assume that resale between the states is not possible.) P = $10 (price = marginal cost) in both Oregon and Nevada. P = $35 in Oregon and P = $10 in Nevada. P = $35 in Oregon and P = $12.5 in Nevada. It should only sell in Oregon, and charge P = $35 there. None of the above choices are correct.

An umbrella manufacturer sells its product in Nevada and Oregon. Due to different climates, each state has different demands for umbrellas. The marginal cost of production is the same in each state and is a constant $10. The demand curve for raincoats in each state is: Qoregon = 120-2P (or P = 60 -0.5QOregon) QNevada = 60 - 4P (or P = 15 -0.25QNevada) The umbrella manufacturer wants to practice third-degree price discrimination. How much should it charge in each state? (Assume that resale between the states is not possible.) P = $10 (price = marginal cost) in both Oregon and Nevada. P = $35 in Oregon and P = $10 in Nevada. P = $35 in Oregon and P = $12.5 in Nevada. It should only sell in Oregon, and charge P = $35 there. None of the above choices are correct.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 2E: The price elasticity of demand for air travel differs radically from first-class (1.3) to...

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