Suppose two types of consumers buy suits.Consumers of type A will pay $100 for a coat and $50 for pants.Consumers of type B will pay $75 for a coat and $75 for pants.The firm selling suits faces no competition and has a marginal cost of zero.If the firm charges $100 for a suit (which includes both pants and a coat),the firm will sell a suit to:
A) type A consumers.
B) type B consumers.
C) type A consumers and type B consumers.
D) None of the answers are correct.

Question

Quizplus · Accepted Answer

Type A consumers are willing to pay $150 for a suit ($100 for coat + $50 for pants) so they will buy the suit at the given price of $100. Type B consumers are willing to pay $150 for a suit as well ($75 for coat + $75 for pants), so they will also buy the suit at the given price of $100. Thus, the firm can sell suits to both type A and type B consumers at this price, making choice C the best option.

Suppose Two Types of Consumers Buy Suits