# Suppose Jen is the only supplier of both coffee and donuts in Smalltown. The cost of producing...

## Question:

Suppose Jen is the only supplier of both coffee and donuts in Smalltown. The cost of producing goods is zero. Jen sells coffee for $3 and donuts for $3. In a typical hour, 5 costumers buy just one coffee, 4 buy just one donut, and 3 costumers buy one of each. The owner finds that those who buy only coffee would also buy a donut if the donut were $2. And those who buy only a donut would also buy coffee if the coffee were $1. If he is considering offering a coffee + donut bundle, so that consumers could buy either just coffee, just donuts, or both of them bundled together, what price for the bundle will maximize his profits?

## Bundle Pricing:

Selling goods in bundles allows producers to better discriminate against there customers by reducing consumer surplus as much as possible. In general, price discrimination seeks to charge each customer there maximum willingness to pay.

## Answer and Explanation: 1

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View this answer**Answer:$5**

There are three possible prices to charge for the bundle as shown below.

**1.**You can charge $6 which is simply the sum of the current prices...

See full answer below.

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Chapter 3 / Lesson 53Read a price discrimination definition, understand the types of price discrimination, learn about the three degrees of price discrimination, and explore examples.

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