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22 November, 04:53

Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm sells coats and pants for $25 each, but offers a bundle containing both a coat and pants for $150, how many bundles will the firm sell

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  1. 22 November, 05:00
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    The firm will not sell any bundle, the amount of bundle to be sold will be zero.

    Explanation

    Solution

    Since firm sells at $25 each for coats and pants, then If consumer wants to purchase both Pant and Coat, the customer will have to pay 25 + 25 = $50.

    Also, If consumer purchase Pant and Coat as a Bundle then, he will pay 150. From the question stated we can conclude that their is a form of interest to pay for Pant and Coat for Both consumers are higher than 25.

    However, they will have to pay an amount less for 1 coat and 1 pant if they buy this in a separate way instead of a Bundle.

    We can say, that type of consumers (both) will not buy the pants and coat as a bundle, but will want to buy them separately.

    Therefore, any bundle will not be sold by firm. the amount of Bundle sold will be known as a zero Bundle
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Home » Business » Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero.
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