firm faces the demand for its product, ,as shown in the figure below.It produces under conditions of constant costs in the long run,and LMC = LAC = $12 per unit. If the firm can practice first-degree price discrimination,it will be able to collect $________ in total revenue under perfect price discrimination.
A)$1,872
B)$1,936
C)$7,744
D)$9,856
E)none of the above

Question

firm faces the demand for its product,  ,as shown in the figure below.It produces under conditions of constant costs in the long run,and LMC = LAC = $12 per unit.  If the firm can practice first-degree price discrimination,it will be able to collect $________ in total revenue under perfect price discrimination.
A)$1,872 
B)$1,936 
C)$7,744 
D)$9,856 
E)none of the above

Quizplus · Accepted Answer

With first-degree price discrimination, the firm can charge each consumer a price equal to their willingness to pay. Using the figure provided, we can see that the highest price a consumer is willing to pay is $16. At that price, the quantity demanded is 244. The firm can then continue to lower the price and sell additional units until the price is $4 and the quantity demanded is 472. The total revenue under perfect price discrimination is the sum of the revenues at each price, which is:

$16 x 244 = $3,904
$15 x 232 = $3,480
$14 x 220 = $3,080
$13 x 208 = $2,704
$12 x 196 = $2,352
$11 x 184 = $2,024
$10 x 172 = $1,720
$9 x 160 = $1,440
$8 x 148 = $1,184
$7 x 136 = $952
$6 x 124 = $744
$5 x 112 = $560
$4 x 472 = $1,888

Total revenue = $21,048

Therefore, the correct answer is C, $7,744.

Firm Faces the Demand for Its Product, ,As Shown