*5.3 Ricardo has moved to a small town with only one gymnasium, the StayFit Gym. His inverse demand function is p = 28 - 0.04q, where q is the number of times Ricardo visits the gym per year. The manager of the gym negotiates separately with each person who joins the gym and can therefore charge individual prices. This manager has a good idea of what Ricardo’s demand curve is and offers him a special deal, where Ricardo pays an annual membership fee and can visit the gym as many times as he wants at

$20, which is the marginal cost each of Ricardo’s visits imposes on StayFit. What membership fee would maximize profit for the gym? The manager could have charged Joe a single price per visit to the gym.

How much extra profit does the gym earn by using two-part pricing?