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

The profits will be "24.5".

Step-by-step explanation:

As we know,

Monopoly Power,
`MC=(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 =
`((1)/(2))* (18-11)* 7`

⇒ =
`(1)/(2)* 7* 7`

⇒ =
`(1)/(2)* 49`

⇒ =
`24.5`