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 $75 for pants and $75 for a coat,the firm will sell a coat 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 a total of $150 for a suit ($100 for the coat and $50 for the pants). If the firm charges $75 for both the coat and pants, a type A consumer would save $25 compared to buying the two items separately. Therefore, they would be willing to buy the suit.

Type B consumers are willing to pay a total of $150 for a suit ($75 for the coat and $75 for the pants). If the firm charges $75 for both the coat and pants, a type B consumer would be getting a good deal since they would be paying the same amount for the suit as they would for just the pants or just the coat. Therefore, they would be willing to buy the suit.

Thus, by charging $75 for both the coat and pants, the firm would be able to sell suits to both type A and type B consumers.

Suppose Two Types of Consumers Buy Suits