their 30 points represented as faces a constant marginal cos

their (30 points, represented as faces a constant marginal cost of $1. 10 points each) Suppose all individuals are identical, and tor Internet access from a certain leading provider can be where p is price in S per hour and a is hours per month. The firm What quantity the firm will sell when the firm utilizes the profit maximizing two-part tariff? a. b. What will be the maximum membership fee? c. How much will be per use fee?

Solution

P = 5 - (1/2)q

MC = 1

a)

Profit maximizing quantity in two part tariffs; P = MC

5- (1/2)q = 1

5-1 = 1/2q

4 =(1/2)q

q =2*4

q = 8

b)

Membership fee = (1/2) (5-1)(8)

= .5 (4)(8)

= .5(32)

= 16

c)

Use fee shall be P = 5 - (1/2)*8

= 5 - 4

= $ 1