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Assume that you manage a printer company that wants to sell its printers to commercial users...

Assume that you manage a printer company that wants to sell its printers to commercial users and home users. You have developed two types of printers – slow printers and fast printers. Each customer type has the following valuations for each type of printer:

Home

User

Commercial

User

Fast Printer

$25

$70

Slow Printer

$15

$25

If you have an equal number of home and commercial users that at most will buy 1 printer each, you will maximize revenue by setting the price of the fast printer to _______.

$60

$25

$55

$95

$70
Business   Economics   
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Answer #1

Answer : The answer is option E : $70.

Based on given table, if the price of fast printer is set at $25 then both Home users and Commercial users will purchase. But if the price of fast printer is set at $70 then only Commercial users will purchase. But $70 is more than the double of $25 and I have equal number of Home users and Commercial users. Hence if the price of fast printer is set at $70 then the revenue will be maximum. For this reason except option E other options are not correct. Therefore, option E is the correct answer.

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