Question

AgK rents out computing services to agricultural producers. They charge a fixed rental payment for the right to unlimited computing at a rate of P USD per minute. There are two types of potential users: 100 farmers and 100 ranchers. Each farmer demand is given by Qf=50 - Pf, and each rancher's demand is given by Qr=20 - Pr, where Q is in 1000 minutes per month and P is in USD per minutes. The marginal cost is 10 USD per minute. Suppose that you could separate farmers and ranchers. For farmers, the optimal usage fee is:

(a).84,500
(b).20
(c).10
(d).0

Answer 1

The optimal usage fee for farmers is $0.00.

Step-by-step explanation:

The optimal usage fee for farmers is $0.00. The optimal usage fee is calculated by setting the marginal cost equal to the rental charge. In this case, the marginal cost is $10.00 per minute, so setting it equal to the rental charge of $P, we get $10.00 = P. Therefore, the optimal usage fee for farmers is $0.00.