Suppose that a price-searcher firm had consumers who were all identical to each

Question

Suppose that a price-searcher firm had consumers who were all identical to each other. The individual consumer's demand function is given by: qD= 40 -3P. The firm decides to try a second-degree price discrimination scheme. The first 18 units will have a price of $7.33. After that, any units a consumer purchases will be only $2.33. The firm has a constant marginal cost of $1.33 per unit. Calculate the consumer surplus. (Do not include a "$" sign in your response. Round to the nearest two decimal places if necessary.)

Explanation / Answer

Part 1)

CS in first block = 0 .5 ( 40 -7.33) (18)

= 294.03

Part 2)

Q when price is 2.33

= 40 - 3(2.33)

= 33.3

CS in second Block = 0.5(7.33-2.33)(33-18)

= 37.5

Total Consumer Surplus= 326.7

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