Suppose that you run a tutoring service for economics students. The table below reports the...
Question:
Suppose that you run a tutoring service for economics students. The table below reports the demand for your services by 8 students per week. In the table are reported each student's reservation price of a tutoring session per week. Note that each student demands at most one tutorial session per week.
In addition, the opportunity cost of your time is $33 per session. There are no competitors for your service.
| Student | Reservation Price ($ per session) | Number of Sessions given | Total Revenue ($ per week) | Marginal Revenue ($ per Week) |
|---|---|---|---|---|
| A | 40 | 1 | 40 | 40 |
| B | 38 | 2 | 76 | 36 |
| C | 36 | 3 | 108 | 32 |
| D | 34 | 4 | 136 | 28 |
| E | 32 | 5 | 160 | 24 |
| F | 30 | 6 | 180 | 20 |
| G | 28 | 7 | 196 | 16 |
| H | 26 | 8 | 208 | 12 |
Suppose that you are able to practice perfect price discrimination. How many sessions will you sell to maximise profits? Compute consumer surplus and the deadweight loss.
Perfect Price Discrimination:
Perfect price discrimination occurs when a producers knows the reservation price of each consume. The producer therefore charges each customer their reservation price in order to maximize profit.
Answer and Explanation: 1
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View this answerIf you can perfectly price discriminate, you will provide sessions to anyone with a reservation price at or above your opportunity cost of time which...
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Price Discrimination | Definition, Degrees & Examples
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Chapter 3 / Lesson 53
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Read 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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