A telephone company offers two services: landlines and Internet. There are two types of customer demographics for these services. One customer demographic values the Internet service at $40/month, but only values landlines at $10/month. The other customer demographic values the Internet service less, at $30/month, but values the landline telephone service at $40/month. The two customer demographics are each comprised of 100 persons. Internet and landlines each cost $30/month to supply to each customer who purchases them (so the cost to supply both products to a customer is $60/month). Which pricing scheme should the telephone company adopt?

Question

Business

Jazlyn Frost

16 February, 08:43

A telephone company offers two services: landlines and Internet. There are two types of customer demographics for these services. One customer demographic values the Internet service at $40/month, but only values landlines at $10/month. The other customer demographic values the Internet service less, at $30/month, but values the landline telephone service at $40/month. The two customer demographics are each comprised of 100 persons. Internet and landlines each cost $30/month to supply to each customer who purchases them (so the cost to supply both products to a customer is $60/month). Which pricing scheme should the telephone company adopt?

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Krystal Parker · Answer 1

individually $40 dollars for each services. getting profit for $2,000

Explanation:

The company can't combine the services to an offer below $60 as it would produce losses.

At $60 dollars only person how value landlines that much will be willing to pay for them thus, we can directly charge $70 for both to take as much as we can bnut that will lead to $1000 of profit only (100 person * (0 revenue - 60 cost)

As the combination offer prove wrongly, we should price separately. Thus, $40 each

that leave us with 200 customer (100 internet 100 landlines) from which profit are, $10 for a total of $2,000