(Figure: Group Pricing 2) Artem's Day Spa sells facials at different prices to different groups of customers. The demand that the owner faces from each of two groups is depicted below. What price should he charge, and how many facials should he plan to provide for each group?

A)Group A: P = $130, Q = 90; Group B: P = $100, Q = 50
B)Group A: P = $60, Q = 40; Group B: P = $60, Q =25
C)Group A: P = $130, Q = 40; Group B: P = $100, Q = 25
D)Group A: P = $60, Q = 90; Group B: P = $60, Q =90

Question

(Figure: Group Pricing 2) Artem's Day Spa sells facials at different prices to different groups of customers. The demand that the owner faces from each of two groups is depicted below. What price should he charge, and how many facials should he plan to provide for each group?

A)Group A: P = $130, Q = 90; Group B: P = $100, Q = 50 
B)Group A: P = $60, Q = 40; Group B: P = $60, Q =25 
C)Group A: P = $130, Q = 40; Group B: P = $100, Q = 25 
D)Group A: P = $60, Q = 90; Group B: P = $60, Q =90

Quizplus · Accepted Answer

The optimal price and quantity for each group is where marginal revenue (MR) equals marginal cost (MC). Looking at the graph, this occurs where the MR and MC curves intersect for each group. For Group A, this occurs at a price of $130 and a quantity of 40. For Group B, this occurs at a price of $100 and a quantity of 25. Therefore, the best choice is C with Group A: P = $130, Q = 40 and Group B: P = $100, Q = 25.

(Figure: Group Pricing 2) Artem's Day Spa Sells Facials at Different