Scenario: Tobac Co

Multiple Choice

Scenario: Tobac Co. is a monopolist in cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm has a constant marginal cost of $2.00 per pack and the fixed cost is $20 million. Through market research, the firm has found that there are two types of customer, Type 1 and Type 2. The demand curves of the two types of customers, and the total market demand curve, along with respective marginal revenue curves, are shown in the following figure.



-Refer to the scenario above.If Tobac Co.could successfully carry out the third-degree price discrimination,the firm would charge type 1 customers ________ per pack and type 2 customers ________ per pack.

A) $5.00; $7.00
B) $7.00; $5.00
C) $2.00; $2.00
D) $12.00; $8.00