$$\begin{array} { | l | l | l | }
\hline \text { Customer } & \begin{array} { l }
\text { Product A } \
\text { Reservation Price }
\end{array} & \begin{array} { l }
\text { Product B } \
\text { Reservation Price }
\end{array} \
\hline 1 & 1,000 & 200 \
\hline 2 & 800 & 400 \
\hline \text { Marginal Cost } & 500 & 100 \
\hline
\end{array}$$
-Use the table above. If the firm does not bundle the products, what single price should the firm charge for product A to maximize profit?
A)500
B)800
C)900
D)1,000

Question

$$\begin{array} { | l | l | l | } 
\hline \text { Customer } & \begin{array} { l } 
\text { Product A } \
\text { Reservation Price }
\end{array} & \begin{array} { l } 
\text { Product B } \
\text { Reservation Price }
\end{array} \
\hline 1 & 1,000 & 200 \
\hline 2 & 800 & 400 \
\hline \text { Marginal Cost } & 500 & 100 \
\hline
\end{array}$$
-Use the table above. If the firm does not bundle the products, what single price should the firm charge for product A to maximize profit?
A)500
B)800
C)900
D)1,000

Quizplus · Accepted Answer

To maximize profit for product A without bundling, the firm should set the price at the highest reservation price that more than one customer is willing to pay. In this case, both customers are willing to pay at least $800 for product A, but only one customer is willing to pay $1,000. Therefore, setting the price at $800 maximizes profit by selling to both customers, as it is above the marginal cost of $500 and captures both customers' willingness to pay.

-Use the Table Above