Use the following to answer questions (1) through (3): In a small town, Hunter H

Question

Use the following to answer questions (1) through (3): In a small town, Hunter Homes is the only builder of homes. Suppose Hunter s total cost is 100, 000 middot Q, where Q is the number of homes built (i .c.. marginal and average cost equal 100, 000). Currently, there are three customers (Alpha, Beatty, and Epie) considering whether or not to buy a home. Their respective demands are indicated below: What is Alpha's reservation price? Unable to determine, since not enough information is given. If Hunter is unable to price discriminate, then the profit it will earn from selling three homes, one to each of these three customers, is: If Hunter is able to perfectly price discriminate, then the profit it will earn from setting three homes, one to each of these three customers, is:

Explanation / Answer

Resrvation price is the maximum price which a buyer is willing to pay. Here for alpha reservation price is 400000.

If seller is unable to discriminate price then he will sell all the home at 175000 and he will earn a profit of 225000.

If he is able to price discriminate he will get profit of (400000 -100000) +(300000 -100000) + (175000 -100000) =575000.

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