Suppose that ABC publishing sells an economics textbook and accompanying study guide. Raheel is willing to pay Rs75 for the text and Rs15 for the study guide. Mariam is willing to spend Rs60 for the text and Rs25 for the study guide. Suppose both the book and study guide have a zero-marginal cost of study production. If ABC publishing charges separate price for both products its best strategy is to charge price that when combined, total ?
Correct answer: B. Rs 75
- A. Rs 85
- B. Rs 75
- C. Rs 80
- D. Rs 60
Explanation
With separate pricing, the profit-maximizing prices are Rs60 for the textbook and Rs15 for the guide, giving a combined price of Rs75. At those prices both buyers purchase both products, while higher prices lose one buyer for the relevant product.
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