A telephone company offers two services: landlines and Internet. There are two t

Question

A telephone company offers two services: landlines and Internet. There are two types of customer demographics for these services. One customer demographic values the Internet service at $40/month, but only values landlines at $10/month. The other customer demographic values the Internet service less, at $30/month, but values the landline telephone service at $40/month. The two customer demographics are each comprised of 100 persons. Internet and landlines each cost $30/month to supply to each customer who purchases them (so the cost to supply both products to a customer is $60/month). Which pricing scheme should the telephone company adopt?

a) Price Internet at $40/month and landlines at $40/month.

b) Price Internet at $30/month and landlines at $40/month.

c) Bundle the two goods at a combined price of $70/month.

d) Bundle the two goods at a combined price of $50/month.

Explanation / Answer

Ans : a ) Price internet at $ 40 / per month and landlines at $ 40 / per month.

Explanation :

The telephone company should adopt the pricing scheme ( Price internet at $ 40 / per month and landlines at $ 40 / per month ) in order to earn more profit. This scheme is more profitable as compared to other schemes available ( option b ,c and d ). This is clearly explained the following tables.

Total custmer Price of Internet Revenue Price of landlines Revenue Total Revenue Total cost to supply both products @ $60 Profit 100 40 4000 40 4000 8000 6000 2000 100 30 3000 40 4000 7000 6000 1000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.