The following table gives the valuations of fruit juices and health drinks by two groups of consumers in the city of Vanilla.A single producer of both products controls the entire market for beverages in this city and is considering strategies to bundle one bottle of health drink with one bottle of fruit juice.Assume that the marginal cost of supplying both varieties is $2 each.

$$\begin{array} { c | c | c | }
\hline \text { Products } & \text { Group 1 } & \text { Group 2 } \
\hline \text { Health drink } & \$ 15 & \$ 6 \
\hline \text { Fruit Juices } & \$ 8 & \$ 20 \
\hline
\end{array}$$
-Refer to Table .Assume that the monopolist sells only health drinks to Group 1 and only fruit juices to Group 2.What profit will the monopolist earn?

Question

The following table gives the valuations of fruit juices and health drinks by two groups of consumers in the city of Vanilla.A single producer of both products controls the entire market for beverages in this city and is considering strategies to bundle one bottle of health drink with one bottle of fruit juice.Assume that the marginal cost of supplying both varieties is $2 each.

$$\begin{array} { c | c | c | } 
\hline \text { Products } & \text { Group 1 } & \text { Group 2 } \
\hline \text { Health drink } & \$ 15 & \$ 6 \
\hline \text { Fruit Juices } & \$ 8 & \$ 20 \
\hline
\end{array}$$
-Refer to Table .Assume that the monopolist sells only health drinks to Group 1 and only fruit juices to Group 2.What profit will the monopolist earn?

Quizplus · Accepted Answer

The monopolist earns a profit by selling health drinks to Group 1 for $15 each and fruit juices to Group 2 for $20 each. The cost of producing each is $2, so the profit from each sale is $13 ($15 - $2) from Group 1 and $18 ($20 - $2) from Group 2. Adding these profits together gives $31 ($13 + $18).

The Following Table Gives the Valuations of Fruit Juices and Health