Drumpf Country Club has the only golf course in Distopia. The (annual) demand to play a...
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Drumpf Country Club has the only golf course in Distopia. The (annual) demand to play a round of golf on its course is given by D (p) = 12000 - 10p where D (p) is the number of rounds demanded each year if Drumpf charged a uniform price of p per round. The marginal cost of having someone play a round of golf is zero and the annual (fixed) cost of maintaining the golf course is 1000000. (a) (15 points) Determine the optimal uniform price for Drumpf to charge for a round of golf. Compare the welfare of golfers and Drumpf in this situation compared to what would have been the case if the price had been set equal to the marginal cost (and the fixed cost had been covered by a subsidy from the Distopian Government). What is the deadweight loss that arises from Drumpf employing monopoly uniform pricing instead of having marginal-cost pricing. (NOTE: you should treat the quantity D (p) as a continuous variable. This means you should evaluate welfare measures such as consumer and producer surpluses as areas below continuous curves.) Drumpf Country Club has the only golf course in Distopia. The (annual) demand to play a round of golf on its course is given by D (p) = 12000 - 10p where D (p) is the number of rounds demanded each year if Drumpf charged a uniform price of p per round. The marginal cost of having someone play a round of golf is zero and the annual (fixed) cost of maintaining the golf course is 1000000. (a) (15 points) Determine the optimal uniform price for Drumpf to charge for a round of golf. Compare the welfare of golfers and Drumpf in this situation compared to what would have been the case if the price had been set equal to the marginal cost (and the fixed cost had been covered by a subsidy from the Distopian Government). What is the deadweight loss that arises from Drumpf employing monopoly uniform pricing instead of having marginal-cost pricing. (NOTE: you should treat the quantity D (p) as a continuous variable. This means you should evaluate welfare measures such as consumer and producer surpluses as areas below continuous curves.)
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