In Questions a Firm Sells Its Product to Two

Multiple Choice

In Questions a firm sells its product to two groups of buyers: daytime buyers and nighttime buyers. There are 50 daytime buyers, all of whom have identical demands given by D_D in the figure below. There are 50 nighttime buyers, all of whom have identical demands given by D_N in the figure below. The firm's variable costs are constant (SMC = AVC = $12) and its total fixed cost is $250,000. The marketing director must devise a two-part pricing plan that will maximize the firm's profit.
-Should the firm bother to sell output to the nighttime market?

A) Yes, because only $77,200 of profit is earned by serving only the daytime buyers.
B) Yes, because only $137,200 of profit is earned by serving only the daytime buyers.
C) No, because $240,000 of profit is earned by serving only the daytime buyers.
D) No, because $300,000 of profit is earned by serving only the daytime buyers.