Question

NH 2015 is the only amusement park in Goleta (it has monopoly power). The owners have decided to enact a two-part tariff: a fixed fee to enter and a per-photo price to get a photo taken with local celebrity Serena. Suppose that the demand for photos is , and that NH 2015's cost function is . If the owners choose the fixed fee and per-photo price to maximize profits, what will the profits be

Answer 1

Answer:

The profits will be "24.5".

Explanation:

As we know,

Monopoly Power, $MC=\frac{dC(q)}{dq}$

                                      $=11$

Withe either two-part tariff,

P = MC

and,

Profit = CS (Costumer surplus)

Now,

$p=18-q=11$

and, $q = 7$

When,

q = 0 and p = 18

Profit = $(\frac{1}{2})\times (18-11)\times 7$

⇒       = $\frac{1}{2}\times 7\times 7$

⇒       = $\frac{1}{2}\times 49$

⇒       = $24.5$