Dunder Mifflin sells specialty paper to commercial clients in the Scranton area. Some of Dunder Mifflin's clients are seen as 'intensive users' who are price-sensitive, and have demands given by: P = 8 – 0.1Q where Q is the number of reams of paper desired per week. Other clients are less-intensive users of paper and have inverse demands given by: P = 10 – 0.2Q. If Dunder Mifflin's marginal cost of paper is zero, and it attempts to separate more-intensive and less-intensive buyers, what price should Dunder Mifflin set for each group? How much profit do they earn under this system?
Dunder Mifflin sells specialty paper to commercial clients in the Scranton area. Some of Dunder Mifflin's clients are seen as 'intensive users' who are price-sensitive, and have demands given by: P = 8 – 0.1Q where Q is the number of reams of paper desired per week. Other clients are less-intensive users of paper and have inverse demands given by: P = 10 – 0.2Q. If Dunder Mifflin's marginal cost of paper is zero, and it attempts to separate more-intensive and less-intensive buyers, what price should Dunder Mifflin set for each group? How much profit do they earn under this system?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter7: Consumers, Producers, And The Efficiency Of Markets
Section: Chapter Questions
Problem 10PA: A friend of yours is considering two cell phone service providers. Provider A charges 120 per month...
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