Figure 16-4
-Refer to Figure 16-4.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the total revenue collected by the firm?
A) $6,720
B) $7,680
C) $10,240
D) $13,440

Question

Figure 16-4 
-Refer to Figure 16-4.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the total revenue collected by the firm?
A) $6,720 
B) $7,680 
C) $10,240 
D) $13,440

Quizplus · Accepted Answer

With perfect price discrimination, the firm charges each customer their reservation price, which is the maximum they are willing to pay for a unit of the good. 
In this case, the reservation prices for each of the 8 customers are as follows:
$960, $880, $800, $720, $640, $560, $480, $400
The total revenue collected by the firm is the sum of these reservation prices:
$960 + $880 + $800 + $720 + $640 + $560 + $480 + $400 = $6,640
However, we need to add the total revenue received from the last unit sold (the 9th unit) at a price of $800, bringing the total revenue to:
$6,640 + $800 = $7,440
Finally, we need to add the revenue received from the last three units sold at a price of $960, bringing the total revenue to:
$7,440 + $960 * 3 = $10,320
Therefore, the total revenue collected by the firm with perfect price discrimination is $10,320.

Figure 16-4 -Refer to Figure 16-4.Suppose the Firm Represented in the Diagram