Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p = 120 – 2q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe’s demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $ 20, which is the marginal cost his round imposes on the Club. What membership fee would maximize profit for the Club? The manager could have charged Joe a single price per round. How much extra profit does the club earn by using two-part pricing?
Answer to relevant QuestionsJoe in Question 5.3 marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan’s inverse demand function is p = 100 – 2q. The manager has a policy of ...The inverse demand curve facing a resort hotel is p = 300 – Q during the high season and p = 100 – Q during the low season. The resort’s marginal cost is $ 50 per night in cleaning costs for the room and general ...A market has an inverse demand curve p = 100 – 2Q and four firms, each of which has a constant marginal cost of MC = 20. If the firms form a profit-maximizing cartel and agree to operate subject to the constraint that each ...In a Nash- Cournot equilibrium, does an oligopolistic firm produce at less than full capacity, at full capacity, or more than full capacity? Explain.Suppose that identical duopoly firms have constant marginal costs of $ 10 per unit. Firm 1 faces a demand function of q1 = 100 - 2p1 + p2, where q1 is Firm 1’ s output, p1 is Firm 1’ s price, and p2 is Firm 2’ s price. ...
Post your question