Question

Assume
a firm faces two customers in the market. Customer 1 has an inverse
demand of p = 110-q1, and Customer 2 has an inverse demand of p=
140-q2. Marginal cost per unit is constant and equal to $40.
Determine the profit -maximizing price and identical lump-sum fee
charged to these two customers. For the following questions, assume
the firm will always sell to both customers. The profit -maximizing
price is $ The lump-sum fee is $ . (Enter a numeric response
rounded to the nearest penny.)

Answer #1

two part tariff scheme :

MC= 40

Profit maximization price = MC = **$ 40**

**now lump sum fixed fees equals the Consumer surplus of
each group**

now at P = 40, Q1 = 110-40 = 70

Q2 = 140-40 = 100

So CS1 = .5*(110-40)*70

= .5*70*70

= **2450**

CS2 = .5*(140-40)*100

= .5*100*100

= **5,000**

**so fixed fee, from group 1 = $ 2,450**

**from group 2, = $ 5,000**

Q2) now if firm sells to both types

Then again *profit
maximization price = $ 40*

*Now charge fixed fees
equals the lower CS*

so that both type of people will participate

So **fixed fee = $ 2,450**

Assume a firm faces two customers in the market. Customer 1 has
an inverse demand of p = 110-q1, and Customer 2 has an inverse
demand of p= 140-q2. Marginal cost per unit is constant and equal
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lump-sum fee charged to these two customers. For the following
questions, assume the firm will always sell to both customers. The
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