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 statements associated with this question are correct.

Question

Quizplus · Accepted Answer

Type A consumers will pay $150 for a full suit with coat and pants ($100 for coat + $50 for pants), while Type B consumers will pay $150 as well ($75 for coat + $75 for pants). Therefore, both types of consumers will be willing to buy a suit for $100, resulting in sales to both types of consumers. The firm can capture both types of customers by charging $100 for a suit.

Suppose Two Types of Consumers Buy Suits