Suppose two types of consumers buy suits.Consumers of type A will pay $100 for a coat, and $50 for pants.Consumers of type B will pay $75 for a coat, and $75 for pants.The firm selling suits faces no competition and has a marginal cost of zero.If the firm sells coats and pants for $25 each, but offers a bundle containing both a coat and pants for $150, how many bundles will the firm sell?
A)0.
B)1.
C)2.
D)insufficient information.

Question

Quizplus · Accepted Answer

Type A consumers will not buy the bundle because they value it at $150, which is equal to the bundle price, so they are indifferent. Type B consumers value the bundle at $150, which is also equal to the bundle price, so they are also indifferent. Since neither type has an incentive to buy the bundle over individual items, the firm will sell 0 bundles.

Suppose Two Types of Consumers Buy Suits