Question

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 charges $100 for a suit (which includes both pants and a coat), the firm will sell a suit to:a. type A consumers.b. type B consumers.c. type A consumers and type B consumers.d. None of the answers are correct.

Answer 1

Answer:

type A consumers and type B consumers.

Explanation:

The willingness to pay of a consumer is the highest amount a consumer would be willing to pay for a good or service.

The willingness to pay of type a consumers is $150 which is greater than the price of suit, so a trade can take place .

For type b consumers, their willingness to pay is $15p which is greater than the price of a suit. So, a trade can take place for type b consumers.

I hope my answer helps you