Homework Answers
P=50-0.1Q
TR= P*Q= 50Q-0.1Q^2
MR= dTR/Q= 50-0.2Q
MC=10
Charging all consumers same Price-
Optimal quantity is where MC=MR
50-0.2Q=10
Q*=40/0.2= 200
P*= 50-0.1*200= $30
Profit*= (P-MC)*Q= (30-10)*200= $4000
Under two part tariff-
Price= Marginal cost
50-0.1Q=10
Q**= 40/0.1= 400
P**= 50-0.1*400= $10= MC
Admission fee= consumer surplus= 1/2*(50-10)*400= $8000
Profit**= admission fee = $8000
Simce profits under two part tariff are greater, so best price strategy is under two part tariff.
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