You are the manager of a monopoly. a typical consumer’s inverse demand function for your firm’s product is p = 250 – 40q, and your cost function is c(q) = 10q. a. determine the optimal two-part pricing strategy. per-unit fee: $10 correct fixed fee: $720 correct b. how much additional profit do you earn using a two-part pricing strategy compared with charging this consumer a per-unit price? $360 correct

a. Per unit price = $10 , Fixed price = $720

b. Profit= $360

Explanation:

a. The monopoly will charge a a per-unit fee such that it is equal to the marginal cost.

Since, total cost = 10q ,

Marginal cost will be $10

Therefore, per unit price will be $10, which equals marginal cost.

Substituting this into the demand equation we get, q= 6

This means that at $10 per unit price, the monopoly sells 6 units.

The fixed fee then should be

b. The optimal per-unit price is determined where

Solving for Q we get,

yields Q = 3 units

Substituting this back into the demand equation we get P = $130.

While, the profit from two part pricing was $720. Thus, you earn $360 more by two-part pricing.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know