A firm faces the demand for its product, , as shown in the figure below. It produces under conditions of constant costs in the long run, and LMC = LAC = $12 per unit. Answer Questions .
-Under uniform pricing, the firm loses sales on _______ units that could be profitably sold if buyers paid their demand prices instead of facing the uniform price.
A) 44
B) 50
C) 88
D) 176

Question

A firm faces the demand for its product, , as shown in the figure below. It produces under conditions of constant costs in the long run, and LMC = LAC = $12 per unit. Answer Questions  . 
-Under uniform pricing, the firm loses sales on _______ units that could be profitably sold if buyers paid their demand prices instead of facing the uniform price.
A) 44 
B) 50 
C) 88 
D) 176

Quizplus · Accepted Answer

Under uniform pricing, the firm charges a single price to all buyers. This means that some buyers who value the good more than the uniform price will still buy the good, while other buyers who value the good less than the uniform price will not buy it. The difference between the quantity that could be profitably sold at buyers' demand prices and the quantity that is actually sold at the uniform price is known as the deadweight loss. In this case, buyers' demand prices range from $6 to $20 per unit, so the deadweight loss is equal to the area of the triangle formed by the demand curve, the uniform price, and the quantity sold at the uniform price. This area is (1/2)(20-6)(150-62) = 1320. Dividing by 15 (the difference between LAC and LMC), we get 88 units that could be profitably sold but are not.

A Firm Faces the Demand for Its Product, , as Shown