Fore! is a seller of golf balls that wants to increase its revenues by offering a quantity discount.

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Fore! is a seller of golf balls that wants to increase its revenues by offering a quantity discount. For simplicity, assume that the firm sells to only one customer and that the demand for Fore!’s golf balls is P = 100 – Q. Its marginal cost is MC = 10. Suppose that Fore! sells the first block of Q1 golf balls at a price of P1 per unit.

a) Find the profit-maximizing quantity and price per unit for the second block if Q1 = 20 and P1 = 80.

b) Find the profit-maximizing quantity and price per unit for the second block if Q1 30 and P1 = 70.

c) Find the profit-maximizing quantity and price per unit for the second block if Q1 40 and P1 = 60.

d) Of the three options in parts (a) through (c), which block tariff maximizes Fore!’s total profits? 

 

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