5. Suppose that individual demand for a product is given by QD =1000 - 5P. Marginal revenue is MR = 200 - 0.4Q, and marginal cost is constant at $20. There are no fixed costs.
a. The firm is considering a quantity discount. The first 400 units can be purchased at a price of
$120, and further units can be purchased at a price of $80. How many units will the consumer
buy in total?
b. Show that this second-degree price-discrimination scheme is more profitable than a single monopoly price.
CHAPTER 11 (Exercise 6 a,b,c; page 310):
6. Suppose an economy produces only two goods, cups of coffee and gallons of milk, as shown in Table 11.E1:
a. Calculate the expenditure on each good and the nominal and real GDP for 2007, the base year.
b. Repeat this exercise for each of the three alter- native cases (1, 2, and 3).