A manufacturer faces the demand function, 20Q + 5P = 120 (where Q is quantity and P is price), and has the marginal cost function, MC = 1+0.8Q. If the manufacturer maximises revenue instead of profit, how will this affect consumer surplus?

A manufacturer faces the demand function, 20Q + 5P = 120 (where Q is quantity and P is price), and has the marginal cost function, MC = 1+0.8Q. If the manufacturer maximises revenue instead of profit, how will this affect consumer surplus?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Product and Price Bundling

Product and price bundling is used as a marketing strategy by businesses, where complementary products and services are combined and sold as a package deal. This bundled price is usually less than the total price of the individual products if they were to be sold separately. When bundled and sold, each product is sold at a reduced price. Using a price bundling strategy helps increase the average revenue per user and also increases the engagement with the user. This happens as the perceived value of the bundled products is more than the individual products.

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A manufacturer faces the demand function, 20Q + 5P = 120 (where Q is quantity and P
is price), and has the marginal cost function, MC = 1+ 0.8Q. If the manufacturer
maximises revenue instead of profit, how will this affect consumer surplus?

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