Suppose that there are four consumers whose maximum willingnesses to pay for a good are $20, $15, $8, and $4, respectively. A firm can produce and sell the good at a constant marginal cost of $6. If the firm practiced perfect price discrimination, its total revenues would equal:
A) $18.
B) $24.
C) $43.
D) $47.

Question

Quizplus · Accepted Answer

Perfect price discrimination occurs when a firm charges each consumer their maximum willingness to pay. In this case, the firm would charge $20 to the first consumer, $15 to the second consumer, $8 to the third consumer, and $4 to the last consumer. The total revenue would be equal to the sum of these charges, which is $20 + $15 + $8 + $4 = $47.

Suppose That There Are Four Consumers Whose Maximum Willingnesses to Pay