Suppose that

individual demand for a product is given by Q = 1200 – 5P. Marginal revenue

is

MR = 200 – 0.4Q, and marginal

cost is constant at $ 20. There are no fixed costs.

a. The firm is

considering a quantity discount. The first 400 units can be purchased at a

price of $120, and further units can be purchased at a price of $80. How many

units will the consumer buy in total?

b. Show that this

second- degree price- discrimination scheme is more profitable than a single

monopoly price.