You are an executive for Seattle City Light and your company is selling electricity. The demand for electricity is given by P= 100-Q, and you also know that MC = ATC = 10. a. You charge one price, regardless how much electricity is purchased. What is the profit maximizing price? What is the total profit? b. You are implementing a volume discount. Let Q1 be the largest quantity of electricity for which the first block rate applies so that P1 = 100 - Q1. Let Q2 be the largest quantity purchased (so that the second block rate will apply between Q and Q2) so that P2 = 100 - Q2. What are the profit maximizing prices? What is the total profit?

Answer rating: 100% (QA)

a Assuming that the company charges one price regardless of the quantity purchased the profitmaximizing price can be determined by setting marginal co... View the full answer