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Question: A soap producer has two types of customer, A and B. Each will buy at most 1 pound per week. Type A customers will pay at most $6 for it, and Type B will pay at most $4. Production cost is $2 per pound. Using a discount coupon costs a Type A customer $1.50 to keep track of the coupon, and a Type B customer nothing.

a. What price should the producer charge the Type As?

b. At this price, how large must a coupon discount be before Type Bs choose to use them?

c. What is the maximum discount a coupon can offer before Type As begin using them?

Microeconomics, Economics

  • Category:- Microeconomics
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