-Bob is the only carpet installer in a small isolated town.The above figure shows the demand curves of two distinct groups of customers-residential and business.If the marginal cost of installing carpet is a constant $1 per sq yard,what price does Bob charge each segment?
A) $1 in each market
B) $5.50 in the residential market and $8 in the business market
C) $1 in the residential market and $5 in the business market
D) $10 in the residential market and $15 in the business market

Question

-Bob is the only carpet installer in a small isolated town.The above figure shows the demand curves of two distinct groups of customers-residential and business.If the marginal cost of installing carpet is a constant $1 per sq yard,what price does Bob charge each segment?
A) $1 in each market 
B) $5.50 in the residential market and $8 in the business market 
C) $1 in the residential market and $5 in the business market 
D) $10 in the residential market and $15 in the business market

Quizplus · Accepted Answer

Bob will practice price discrimination, charging each segment a different price based on their demand elasticity. He will charge $5.50 in the residential market and $8 in the business market to maximize profit, as these prices are where marginal revenue equals marginal cost for each segment.

-Bob Is the Only Carpet Installer in a Small Isolated