4. (3 pts) Jimbob’s Garage is the only auto repair facility in a remote area of
ID: 1190252 • Letter: 4
Question
4. (3 pts) Jimbob’s Garage is the only auto repair facility in a remote area of the Nevada desert. The proprietor, Jimbob, does not post his prices for services. Knowing his customers are travelers who are desperate to get their vehicles repaired, he sizes each one up for their apparent ability to pay, and charges them accordingly. Suppose annual demand for his repair services is Qd = 1000 - .5*P, and his marginal cost per repair job is $80. What is the range of prices he will charge his customers? How many cars does he repair per year? What is his profit if his fixed costs are $12,000/yr?
Explanation / Answer
Under first degree price discrimination, set P = MC = $80
Substitute this in the demand equation as:
Q = 1000-5P
Q = 1000-5(80)
Q = 1000-400
Q = 600 units
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.